Sadly, in 2012, the Federal Reserve Bank of New York reported that the average outstanding student loan balance was $24,301, with 10 percent of borrowers owing more than $58,000. I know when I graduated I owed $46,000 in student loan debt and the interest rates were high: 8% and higher. It is absolutely essential to see these loans as a deterrent to your life: they have to be paid off, in order to go ahead with your plans for a home purchase and a decent lifestyle. Here are some ways to attack that debt! You need to make a plan – it will take time and perseverance but it will work.
1. Find out what you owe
Go to the Federal Student Aid site where you can pull up your debt, and plug that information into a spreadsheet. Put all of your debt on this spreadsheet, starting with the highest rate of interest down to the lowest. This is where you will pay off all your debt. Besides your student loans, put down your credit card loans, etc.
2. Understand your federal student loans.
Add all of your loans together to see the actual amount you owe each month.
3. Make sure you understand your federal student loan exit counseling.
Are your interest rates fixed or variable? Understand the terms of your loans, both federal and other personal bank and credit card loans. Understand that federal loans have different terms. Understand that the consequences of NOT paying your student loan debts off is HUGE – You can ruin your credit store, which affects your ability to rent an apartment, pay higher on utilities, and in the case of federal loans, you can force your employer to garnish your wages. For the most part, you can refinance student loans for a better interest rate on all, or at least some of your existing student loan debt.
4. Consider how to lower your debt realistically.
Consolidate and reduce interest rates on your student loans for lower payments from companies like LendEdu.
5. Pay double what is due every month.
Schedule bi-weekly payments instead of monthly payments, making double payments like paying on a mortgage.
6. Create a five year plan and make the payments religiously – know when the payments end.
Act as if it is a goal and pay it off. Make a budget.
7. Have an amount taken from your checking account automatically every month.
$100 or $200 – it is easier if you don’t see the money coming in (enroll in auto debit). Keep this extra account only for paying off student loans. Tie the account to mutual funds or money making accounts and let it grow, then pay off the student loan in big chunks.
8. Work while you are in school and bank the money.
Make this an account for paying off your student loans ONLY.
9. Have an emergency fund of $1,000 in your regular savings account.
This way you do not have to touch your Student Loan payback account.
10. Plan ahead, make sacrifices and don’t get into instant gratification mode.
Live within your means, save and plan for monthly student loan payments. Find a roommate. Move to a cheaper apartment. Take on an extra job like babysitting. Put these savings into your SL payback account.
11. Take advantage of tax breaks on interest on student loans.
If you earn under $60,000 a year or $120,000 if you’re married and filing jointly, you can deduct up to $2,500 of student loan interest you’ve paid in the last year from your taxes.
12. Have a positive I can do attitude.
Remember, you are paying off a COLLEGE EDUCATION, which is your gateway to a good job, a good life, a home, etc. Realize that while this will take determination and time, it is no different than setting the goal to do well in school. You did it, and you can pay the loans off realistically. With the good job that you get from your education, you can travel, you can enjoy the life that you want. And you can establish excellent credit. See it as a challenge that you can meet!
13. Check out employers who offer help with your student loans in their benefit package.
Government employees may receive up to $10,000 a year in assistance paying back federal student loans through the U.S. Office of Personnel Management’s Student Loan Repayment Plan. The Nursing Education Loan Repayment Program offers loan assistance for nurses, and the U.S. Military offers their own loan repayment programs for qualifying education loans. Teachers may even have multiple loan-forgiveness options.
Get as much information as you can and make it a goal to pay off your loans and live the good life that you deserve!