Going to college can be expensive. So expensive that you could be stuck with student loan debt of an astronomical amount. Budgeting expert Nathan Lippincott gives you tips for ways to avoid this debt.
Student loan debt might just be the biggest financial problem facing those in their 20s and 30s today. As of 2018, students owe around 1.4 trillion dollars of student loan debt. This is more than credit card and auto loans combined. This is a significant barrier to financial freedom and one that many feel they will never be able to overcome. But with a solid plan and some established steps to achieve it, these debts can be paid in complete.
Steps to Take to Pay Your Student Loans
1. Figure out the amount: How much student loan debt do you have in total and what kind of loans are they? There are some loans that started charging interest the moment you signed on the dotted line for them. There are some loans that let you pay them off while you are still in school. There are even some loans that will fine you if you pay them early. You have to know which loans you have and how much you owe before you can pay them off.
2. Start making small payments: Continue making your minimum payments, and add a little extra from the auto-draft. Even you can only pay $20 each month, that's ok, at least you have started! The auto-payment removes any indecision and makes it harder for you to change your mind.
3. Create a budget and a timeline: Setting goals to achieve financial freedom is important. It is difficult to climb a mountain that you cannot see. Your budget will help you see how you can afford bigger payments and the timeline gives you a realistic view of when you will achieve your goals.
As a financial planner, I have the tools to help you through these steps. My favorite part of the steps is creating the spreadsheet with you. Seeing the numbers on paper will help ensure movement is made in the right direction - towards positive net worth. We can even add a column for how much debt has been paid off and we can focus on that one - set yourself up for a positive win and make sure that your debt is climbing down.
Some Tips & Tools to Help
It will probably take several years to pay off your student loan debt, but don't let that discourage you. There are things you can do to speed up the timeline.
Determine your Payoff Date: Do you know exactly when you'll be free of student loan debt? If you answered no, you are not alone. But figuring out your payoff date is always a good place to start when it comes to managing debt. Why? Because once you know this date, you can work on moving it closer. The easiest way to figure this out is to add your student loans to the Student Loan Hero dashboard. This free account lets you add loans, adjust payments and check new due dates.
Use Cash Windfall: When you receive a lump sum of cash, send it toward student loan debt. Lump sum can come in the form of a tax refund, an end-of-year bonus, or even an inheritance.
Think Outside The Box: If you really want to jump-start paying off your student loan debt, think outside the box and make it a part of your comprehensive budgeting approach. Reduce your bills as much as possible. If you read my earlier blogs, you will remember that I moved into a 300-square foot trailer for three years in order to reduce all utilities and rent and apply the surplus to my debt payments.
Student loan debt can be intimidating, but most of that that fear comes from feeling like you will never be able to pay it off. But if you know what you're facing, start taking action and create a timeline, you will make significant progress. Contact me if you are ready to start today!