Student loan debt: those three words send shivers down the spines of students and parents alike. Whether students choose to acknowledge its existence or not, for a majority of them, it is coming. And everyone can agree, it is not something they look forward to.
As a matter of fact, it is mentioned at the beginning of a bankrate.com article that, as of 2016, the average student loan debt reached $37,172, which was a 6.05 percent increase from the year before. These statistics were provided courtesy of the vice president of strategy for college scholarship website cappex.com, Mark Kantrowitz.
1. Treat the loan like a mortgage. This can be done by simply making larger payments to cut out the principal more quickly. For example, if one has a $25,000 student loan with a 6.8 percent interest rate and a 10-year payback period, they would be making at least a $288 month payment. Kantrowitz makes the hypothetical suggestion of paying $700. This would take someone just over three years to repay the loan. Kantrowitz also suggests adding payments and sending in checks every other week instead of just once a month.
2. Create a three-to-five-year plan. Wealth manager of A&I Financial Services, Clayton Shearer, highly suggests using this method, as it will give a sense of comfort knowing exactly how long it will take to pay the loan back. Shearer adds that clients “have a goal in place, they’re committed to it, and they know exactly what to pay monthly.”
3. Set aside money specifically for the purpose of paying off your debt. Having a portion of earnings automatically put in a savings account is effective because it is forced. Doing this will enable one to have money set aside that can grow, as opposed to it being spent on eating out or online shopping. Everyone on earth knows you do not do any more of that. It is important to mention that if one decides to set aside money to repay a loan, they need to open a new account as opposed to using one they already have. This way, they are less likely to use that money on something other than paying off debt.
4. Get a part-time job while in school. By having a job, one can then put aside a certain amount of thier paycheck for the purpose of paying off debt, as mentioned in the last step. To go about this successfully, it is important to make a plan and put together a budget. Getting a head start and already having money ready to pay off debt before graduation will feel infinitely better than not.
5. Avoid the usual traps. We all have those “instant gratification” temptations we contemplate foregoing our financial goals to indulge in. For most, this could be by far the toughest action on this list to take. It is important to have a big sit-down with yourself and decide what you need money for, and what you could cut back on. Discipline is crucial.
When it comes to debt, students know it is a guaranteed pain in the neck. Therefore, the best way for dealing with debt is just by sacrificing now and getting the nonsense done and over with as quickly as possible.
Photo: Rachel Futterman | The Oswegonian
