While some may be forced to postpone or student loan default, it’s better if you can come up with a system to pay them off – and within the framework of a modest time limit.
“There are two main reasons to pay student loan debts within a reasonable time,” said Maizi Simpson, data and news editor at Credit Karma, said Business Insider via email.
“The first is related to interest: the longer you choose the repayment period, the more you will pay,” said Simpson. “The second reason is that the longer you have a student loan debt, the longer you can postpone making big life decisions or invest in your future, for example, start a family or contribute to 401 (k)” .
When it comes to paying off your student loans, no matter how intimidating the amount owed, adopting an effective payment plan is key. Here, Elissa Kirkham, financial reporter and student loan expert for Student credit hero, led us through a 10-stage student loan repayment plan.
1. Know what you should
Kirkham said that the first step in repaying your debt is know your debt, especially since you could take several student loans with various lenders. “Many people think too often or look too closely at their student debt for a simple reason: Student loans are a huge source of stress.," she said.
She suggested using National Loan Accounting System find any federal student loans that you took out to college.
“You can also find both federal and private loans listed in your credit report, and make sure that you make proper payments every month,” said Kirkham. "In addition, write down the current balance and interest rate for each student loan."
2. Spread the debt on student loans
If a student loan is threatened or not already paid, Kirkham advised you to try to tie them up.
“First, switch federal student loans to revenue repayment plan to reduce monthly payments, ”she said.“ Then apply for a deferment or forbearance to suspend payments if you cause a serious financial failure, for example, To lose a job".
Kirkham said that many private credit lenders also provide an opportunity to defer payments. "And keep in mind that if you do not have direct subsidized loans, deferred student debt will continue to charge interest and your balance will increase."
3. Evaluate other financial considerations.
Kirkham said to consider whether other financial goals are needed before you can succeed in student debt. “If you have other debt, such as credit card balances that cost you more than your student loans, it might be wise to pay them first,” she said.
4. Get – and save – your living expenses under control
Kirkham suggested that your biggest monthly expenses be as low and affordable as you can.
“I got married right out of college, and my husband and I borrowed more than $ 40,000 to pay for our education,” she said. "We immediately paid our student loans – about $ 17,000 within three years after graduation – and in July 2018 we paid the remaining balance on student loans."
She said that keeping her lifestyle in check is a huge factor that allowed her to repay her student loans in a timely manner. “I chose more affordable apartments, for example, and shared a car with my husband for many years to postpone the purchase of a second car,” she said.
Kirkham said to take a look at his own monthly costs and refinement your budget“Draw recurring costs, be critical and see if you have the ability to cut or cut,” she said. “For example, can you save only one of the three video streaming services you are subscribed to? Every dollar that you cut from your expenses means an extra dollar that you can use to pay off a student loan. ”
5. Decide how much it costs to invest in student loans.
“As soon as you calculate your expenses, see how much is left,” Kirkham said. "This is your discretionary income — money that you can decide how and when to spend."
She says you have to decide how much discretionary income you want to make in payments for your student loan debt. “It’s best to set a solid dollar amount that you can pay every month,” she said.
Kirkham said that while you may be able to afford all this in relation to your student loans, it is important to be realistic. "Do you want to create a spending plan that you actually stick to," she said. "Try to reduce these extra costs without making yourself unhappy. For example, I learned DIY what I could do: I cooked at home, worked at home and even learned to give myself a great manicure. ”
6. Make extra student loans every month.
Kirchem said that they provide additional student loans every month by setting up an automatic surcharge for each deposit. “It sets the goal of your debt to students and keeps it in the know, rather than putting it in the best interest of your spending habits.”
However, she said to check your monthly statements to make sure that your additional student loan payments are applied properly. "Some service providers will consider them as advance payments instead of applying them to your main person, for example, she said.
7. Target student loan with a high interest rate first using the avalanche method
“When you repay this balance, it will also reduce the amount of interest you pay each month, so your dollars are used to actually reduce your principal debt and get you out of debt,” said Kirkham. "If you pay back this first loan, you simply put the amount you pay (including both the monthly payment and additional payments) on the student loan with the next highest interest rate."
8. Refinancing certain student loans
Kirkham said another way to attract high-grade student loans could be to refinance them.
“Private student loans and student PLUS loans, in particular, have fairly high interest rates that may make sense to refinance,” she said. “You need to be well prepared, but this step can help you replace your debt with a high percentage with a new private student loan at a lower interest rate.”
9. Put any losses or rise to your student debt.
Kirkham suggested looking for "extra" income, which you can use to get a piece of your student loans, for example Tax return, bsalary, cash gifts, Ras well as income from side fuss,
“In particular, the focus is on increasing your income by increasing profits, trading for a better job or lateral bitch It can be a great way to generate more money that you can use to target student debt, ”she said.
10. Treat yourself and stay motivated.
"Student loan repayment is a marathon, not a sprint, and this requires similar skills and strategies, ”said Kirkham. She said to pamper herself and find the budget and student credit system that best suits you.
“Watch the prize and focus on your goal of paying off student loans,” she said. "Track your progress and celebrate your victories as you go, starting with the first additional installment you make on the first student loan you pay before the last payment you ever sent to a student loan.