The following article is a guest post from Andy who details his five tips for tackling your student loan.
“When you run in debt, you give to another power over your liberty” – Benjamin Franklin
Simply put, student loan is costly to service and the burden must be laid off as early as possible. To that end, you may glance through some practical ways to get out of your debt woes and live a hassle-free life. Here are 5 tested ways to get out of student loan debt quicker as a recent grad:
Pay more than the minimum
It’s one of the simplest, yet one of the fastest ways to pay off your debts, especially student loans. Add an extra payment to the minimum monthly payment. Make sure the extra payments are being applied to the principal amount. If not, it might go to interest which does not bring down the overall amount owed. You can easily manage the payments by setting up for monthly automatic payments.
When you make automatic payments, you save yourself the ill effects of procrastination as well as indecision and it’d keep you from changing your mind. The amount you add could be anything – $20, $30 or $40, it’s some thing better than nothing. At least start off from a point and work your way up the ladder gradually. Some lenders will decrease your interest rate if you are set up for automatic payments. Therefore make sure you ask your lender if this is possible.
Look for debt relief options
There are several student debt relief options you can take advantage of. Two are refinancing your loans and student loan consolidation. If you can get your student loan refinanced with attractive interest rates, then you can shed off your college debt faster. The objective of refinancing your student loans is to reduce interest rates. You can ask your creditor to refinance your student loan with rates under 3% or more (as per market trend).
Furthermore, you can consolidate your student loans into one monthly payment. You want to make sure your high-interest loans are paid off before you consider consolidating your loans. Following consolidation of your student loan make sure that your interest rates do not increase. As such, it is important that you pay off your high-interest loans first.
Put raises towards loan repayments
If your employer provides you with a yearly pay raises (or even a one-time raise), put that extra money toward your student loan debt. The last thing you want to do is use that raise to get a nicer car, more expensive home, or buy things you don’t need. Can you use a small amount of it for something you have had on your list for a while? Of course. I recommend using most of the raise to pay off your debt faster. Try to put 75% of your raise toward extra loan payments each month.
Opt-in for student loan forgiveness
Some jobs offer loan forgiveness. As such a portion or all of your student loan is written off. The two programs that offer this service are the Public Service Loan Forgiveness (PSLF) and the Teacher Loan Forgiveness.
In case of PSLF, you must have a ‘Direct Loan’ outstanding balance after having made 120 qualifying monthly debt repayments, as per the qualified repayment plan and must have been a full-time worker of a qualified employer. For the Teacher Loan Forgiveness, you must have either a Direct Subsidized Loan, Direct Unsubsidized Loan, Subsidized Federal Loan, Stafford Loan or Unsubsidized Federal Stafford Loan.
Furthermore, you have to work for 5 consecutive years as a teacher in an elementary, secondary or any other educational institutions that caters to low-income families to be eligible for the forgiveness program. Make sure you do your research to see if you are eligible and what the other requirements might be.
Redo Your Budget
Getting out of debt is hard and you might have to cut costs in other areas of your budget to get out of debt faster. Though it could seem harsh, yet many debtors before you have reconfigured their budgets to accommodate their debt repayments. For instance, you can relocate to an affordable apartment, skip restaurant meals or happy hours, and earn on the side.
The key to success here is that you need to make sacrifices until you are out of debt. The sooner you realize it, the better you can manage to come out of your messy financial obligations. Lastly, approach your debt strategically. Consult a personal finance expert, if it’s overwhelming for you to start paying off your student loans.