Here are some simple ways to eliminate the student loan debt that's wrecking your finances.
You walk across the stage grinning from ear to ear. College is finally over, and you’ve landed your dream job. Life’s great. Fast-forward a few months, and student loan debt has taken your wallet captive.
You’re definitely not alone.
The Project on Student Debt says, “Seven in 10 seniors (69 percent) who graduated from public and nonprofit colleges in 2013 had student loan debt, with an average of $28,400 per borrower.”
But there is hope. Here are 13 ways to expedite the repayment of your student loans.
1. Face the music
Taking responsibility for your student loans is the first step. It’s impossible to solve a problem you don’t realize you have. Be positive and remember why you incurred the debt.
2. Make a plan
If the result is unfavorable, revisit the drawing board to make cuts to your variable expenses. Stop eating out every night of the week, hanging out at the bar with pals, treating yourself to spa treatments, throwing away money on cellphones and cable and going on random shopping sprees. These are just a few ideas to help you get started.
3. Stop using debt
Money is tight, but you’ll never dig yourself out of the hole if you keep relying on debt in the crunch. And refrain from opening any new accounts. Freeze the credit cards in a block of ice if you have to.
4. Start making payments immediately
Still in school? Any amount you can contribute to debt repayment helps, even if it’s only $25 biweekly and the loan is deferred.
5. Get a side gig
Whether it’s a part-time job or an occasional freelance opportunity, any extra income used to pay down your student loans can reduce the repayment period.
Let’s say you have a $5,000 loan with a five-year term, 6 percent interest rate and $96.66 minimum monthly payment. If you’re able to generate $100 per month to use toward the balance, you will reduce the repayment period by 32 months.
6. Implement the envelope system
Having a hard time keeping your spending habits in check? Try implementing the envelope system, which forces you to rely on cash. Once the cash is gone, it’s gone.
Say goodbye to that posh apartment downtown and hello to your new roommate or parent’s basement. This is definitely a sacrifice, but it will free up a nice chunk of cash to allocate toward those balances.
Using the illustration from above, if you’re now able to reduce your living expenses by $600 and allocate this extra amount to the balance each month, the loan will be paid off in eight short months.