It is not a secret that the cost of going to college has exploded over the 10 years or so. Because of the staggering expense to go to college, more and more graduates are burdened with student loan debt. Almost 70-percent of college graduates have accrued some sort of student loan debt and the average total of loans for a student is nearly $30,000. That’s a huge burden to shoulder for a young person who is looking to establish themselves.
Making payments to enormous student loan debt can put everything else on hold for a person like buying a house, financing a new car or saving up for a vacation. The typical repayment period for student loans is 10 years, however, if part or most of your college was financed by student loans, your monthly payment will likely be incredibly high.
The purpose of this article is to give you some ideas on how to manage your student loans or even how to help pay them off faster and achieve financial freedom. It is incredibly helpful to sit down and figure out exactly how much you owe, the due date and how much the interest rate is. Having this knowledge will help make formulating a plan easier for your situation.
Get Started Paying Right Away
Those borrowing loans through the federal government are typically granted a grace period before the first payment is due. During this time, there is no interest tacking onto your principal balance. While it is tempting to take advantage of this grace period and not make any payments while you are getting settled in in a new job, but even paying a small amount each month can help chip away at the principal balance, which will reduce the effect the interest will have once the grace period is over.
Pay More Than is Required
Going above and beyond the monthly minimum is probably the best way to pay off student loans faster. Whenever you pay more than the minimum, that extra money is going towards the principal rather than just paying off the interest. Lowering the principal has long term benefits by reducing the amount of interest you pay over the lifetime of the loan.
It is very important to read over the terms of your loan to make sure there is not a prepayment penalty if you pay off loan early.
Take Your Career to the Public
If you decide to work in public sector, the public service loan forgiveness program states that if you make on-time payments for 10 years, any debt remaining after that period will be forgiven and cancelled. It’s a tempting offer, but there is the stigma that public jobs do not pay nearly as well as their private sector counterpart.
Tuition Assistance from your Employer
Companies have spotted an advantage in hiring the best talent by offering tuition assistance as a perk of the job. This approach has become increasingly popular over the last few years as a way to help millennials from jumping ship. While the vast majority of companies do not offer this, more and more are beginning to see the benefits of offering such a perk.
Ask for a Raise or Find a Higher-Paying Job
Perhaps the easiest, and most straight-forward, way to pay off student loans faster to put yourself in a position where you have more money to spend towards it. This can be achieved either by asking or a raise at your current job or testing the job market to find a higher paying position. If you take either approach, use the difference between your old job’s salary and new jobs and redirect that towards your student loans.
Be Cautious of Income-based Repayment Plans
Income-based repayment plans help people with lessening the monthly payment of their student loans if the 10-year plan payment is too much. While it is tempting to reduce the monthly payment of your student loans so that all of your income isn’t going towards them, doing so does mean you are only prolonging the life of the loan and, in the long run, paying more over time.