When paying back student loan debt, many people end up falling into a trap. They feel the need for instant gratification and don’t plan ahead. Instead of making a plan, making sacrifice, saving money, and paying over time, some people just want to get it over with immediately. Research has found that the people who are most successful at paying off their college debt are “those who live within their own means and are conscious about saving” (bankrate). Below are five tips to help you plan, save, and pay off your student loans as fast as possible.
Treat the loan like a mortgage
If you can afford to do so make larger payments and treat the loan like a mortgage. By making larger payments, you will reduce the principal more quickly, which will result in lower interest charge. If possible, instead of paying $200 a month pay more like $700 a month. Another path that you could take is by paying every two weeks instead of once a month. Either way you choose to pay, going down one of these paths will significantly reduce the amount of time that you will be paying back the loan for. This will allow you to have more time to save up money for other things such as buying a house or sending a child to college.
Create a plan
Ideally you should be creating a three to five year plan. Many people find comfort in knowing exactly when they will pay off their loan. Sit down one day and look at your finances. Plan out exactly how much you will pay each month and make sure you stick to your plan! Know how much you make and see if you can cut costs from somewhere else until you pay off your loan. Take a look at your budget and know what you can survive without. Having a plan can really help you pay off your loan faster than if you hadn’t sat down and looked at your finances.
While in college start a business
Earning money while still in college is a great way to stay ahead of your debt because you save money to begin repaying your loans as soon as you graduate. Starting a business in school something that is very easy to do, as many schools have programs that help students if they want to start a business. There are also organizations that specifically help students who want to start their own company. Starting your own business while in school can really pay off in the long run. Your company will be a manifestation of the effort that you put in. It might not be successful at first but eventually it will be. There are many people who started businesses while in college like Mark Zuckerberg and Michael Dell.
Establish a fund
If your job allows you to do automatic deposits, do it! Having money automatically put into your bank account is forced savings. It enables you to set aside money instead of immediately spending it on nonessentials. To remind yourself not to touch this money, make sure this account is strictly for paying off your loan. Don’t have this money get deposited into your checking or savings account because you might accidently, or purposely, use this money for something other than paying off your loan. If possible, keep your money in the account for as long as possible and allow it to gather interest. Then make a large payment towards your loan. Just be sure that you research the risk associated with savings in mutual funds investments before deciding to go down this path. However, many people have found that the benefit outweighs the risk.
Student loan debt relief programs
If you call your state’s local government you can see what types of plans they have available to help graduates pay off their student loan debts. While these programs are free, the downside is that you have to deal with government bureaucracy. This process could take a while and involve a great deal of paperwork. However, if you have the time to deal with it it’s definitely a great path to explore. Another option is checking out Matt Sapaula’s company, MoneySmartGuy. You can give them a call and see if you are eligible for any student loan debt relief programs that they can help you navigate.