Congratulations! You’ve worked so hard these past few years and you finally did it. All those long nights studying and cramming for tests finally paid off. Graduating college is an amazing feeling because now you finally get to make your mark on the world. However your education comes at a cost, and it was not cheap. Six months from now you will have to start paying back your student loans, and that can be challenging. With student loan debt currently averaging $36,500 per borrower, it can be intimidating when it comes to paying it off. Although this can be stressful to think about at first, we’re going to tackle some ways you can be ahead of the game, and pay off your loans quickly.
1. Build A Budget
The average monthly payment for student loan holders is around $250. This is why building a budget is such an important step to paying off your loan. Building a budget will set you up for a healthy way to balance your saving and spending. Getting on a proper spending/saving schedule will help you set aside enough money to repay your student loan. There are several budgeting techniques that will work however my favorite is the 50/30/20 budgeting technique. This means you spend 50% of your money on necessities 30% on wants and 20% on savings and paying off debt.
2. Make Larger Payments
If you are able to make larger payments to your loan, do it. By making larger payments you will effectively be able to lower your principle, thus paying off your loan faster. With the average monthly payment among student loan holders being $250. Even if you contribute an extra $20 that totals up to an extra $240 a year. That is almost whole extra payment within a year.
3. Schedule your payments
Making scheduled payments is a great way for you to be on track with your payments. If you know you get paid every other Friday schedule your payments to come out on payday. That way by time you get paid you will have already made your payment. This prioritizes your payments before you are able to spend your hard earned money on anything else.
4. Bonuses & Tax Refunds
It’s not often that you run into extra money however, if you know your company gives out quarterly or yearly bonuses then you’re in luck. Take this opportunity to use these bonus funds towards your student loans.
Everyone loves a good tax return, if you know you’re going to get a tax return this year and don’t know how to spend it. You can use your return to pay down your school debt.
5. 0% Interest
Due to the Covid-19 pandemic the U.S. Department of Education extended the loan payment pause through August 31. 2022.
0% interest rate
Suspension of loan payments
Stopped collections on defaulted loans
Taking advantage of 0% interest will allow you to pay down strictly the principal balance on your loans. As this is part of the CARES act the government also issued thousands of dollars for students to apply for. Through the Higher Education Emergency Relief Fund students are able to receive funds through their school. These are issued each time the HEERF was signed due to the Covid-19 pandemic. These funds are on a first come first serve basis. These funds can be applied directly to your student loans at a current 0% interest rate.
Lastly
Sticking to the plan.
Create a budget that fits you and your goals. Make scheduled payments within that budget. If you have extra money put them toward your loan. The fastest way to pay down your loan will require you to stay focused and stick with your plan.
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