While a lot of people say that you cannot put a price on a good education, a lot of Millennials are more than aware of how much their education ended up costing them. Becoming a graduate and completing your studies should mean the beginning of the new stage in life — the stage when you can start saving and affording things that you have always wanted.
However, the reality is a bit different for most students. Once you get your degree, you are off to finding a job and directing most of your income towards paying off your student loans, which could take decades to complete. As someone who has already been there, we’re ready to share some useful advice on how to do it fast.
In This Post:
Start Thinking About It Before You Get a Student Loan
In our opinion, paying off your student loan actually starts before getting one. What we mean by this is that you need to think twice before you choose your Student Loan Provider. Issuing student loans has become a lucrative business in the past years, which is why there are many companies that offer these services.
A good place to start is the web. Research the best Student Loan Providers which you can find on different lists, such as the one shown on Hot5.com. You’ll get a better idea of what is important to look for and what are some red flags that you should definitely stay away from.
Pay More Than the Minimum Payment
Now that you actually have a student loan to pay off, you should think about the strategy. One of the best ones we can recommend is to pay more than what your minimum payment amount states. This does not mean that you should pay double or triple the original amount every month, as that might be difficult to do.
However, even $50 or $100 will count after a long period. The additional amount that you pay each month will apply directly to your loan principal, so you’ll see some fast reductions. A good way to stay on track is to set up automatic payments which will eliminate any indecisions.
Know Where Your Money Is Going
Creating a budget and sticking to it is one of the best things you can do for your finances. This is especially important if you know that you are not very good at managing money, but you want to learn the skill and pay off your student loans faster. At the end of each month, you will know exactly how much money you’re spending and on what, which will allow you to cut unnecessary expenses.
A good idea is to use a money expense tracking app, such as AndroMoney, which lets you categorize your expenses, track several accounts, add different currencies, and so on. It’s a real eye-opener, and the basic version is completely free.
Create a 3- to 5-Year Plan
One of the mistakes a lot of people make when paying off their student loans is not setting a deadline. Creating a 3- to 5-year plan is realistic, and it will give you a better idea of what is necessary to do in order to complete your payments fast.
Making a plan like this means putting your income and your expenses on paper and considering the number of months you have left until your deadline. After that, you can start changing your day-to-day spending to meet your quotas. A lot of people who do this even exceed their payment due dates, but even if you don’t, you will at least severely reduce the necessary time.
Start Early and Create a Student Loan Repayment Fund
There is no need to wait until you graduate to start paying off your student loans. You can get a part-time job while still studying and save the money you earn. If your parents are willing and able to provide for your day-to-day expenses while you’re a student, you can direct most of what you earn towards a student loan repayment fund.
To set one up, you shouldn’t use a credit or a debit card that makes it easy for you to draw money from. Instead, open a new account, preferably a savings one. Compare different savings accounts and find the one with the highest yield which will maximize your savings.