According to the nonprofit American Student Assistance, there are approximately 37 million people with student loans in the United States today, and the average balance is about $24,000.
The terms on student loans are meant to keep your monthly payment low, and they’re meant to keep you in debt for a long time.
In fact, graduating from college with student loan debt means that already your money isn’t 100% yours.
Someone else is earning interest on the degree you paid for.
Practical Tips For Student Loan Debt
1. Forget About the Grace Period (unless you still don’t have a job)
If you got hired right after college, congratulations! Your student loans have a six-month window where they do not accrue more interest – this is called the student loan grace period. Do not take advantage of that. If interest rates double in a month, you’ve done yourself no favors by waiting to start paying. This grace period is meant to help those who haven’t yet been hired. So if you’re working (even if you’re not working in your field) this doesn’t apply to you.
2. Pay More Than The Minimum Amount Due
This is really key. Pay your minimum each month, but make sure you pay more than that. Back in my day, young grasshopper, it made sense to consolidate all four of my student loans into one. But those days are gone. So pay your minimums on all four (or more) loans and pick one, any one, to target, and throw extra money at that one.
One of the best ways to be able to afford this is to earn extra money. We’re big fans of side income, and here are over 50 ways to earn extra money on the side.
3. Make Paying Them Back a Priority
This is a mindset, not a matter of just paying bills. Student loan debt is bad debt. Did you know that if you’re down on your luck, and you end up having to file for bankruptcy, that you can’t just walk away from them? Don’t be shackled by your student loans for any longer than you have to. My little sister is so far in student loan debt that she’s on a 25-year repayment plan. That means she will be paying her loans back for longer than she has been alive at this point.
4.Make it a Game
We’ve talked about how paying off debt is easy if you make it a game. You know how the GPS tells you how long it will take you to get to your destination? If you’re anything like me, you look at that sometimes and think, “17 minutes? Challenge accepted, GPS. Game on.” Do the same thing with your student loans! Heck, it’s even more satisfying than knocking four minutes of your trip to the grocery store.
5. Calculate the Total Amount You’ll Pay Over the Lifetime of the Loan
Use a calculator like this and get your head out of the sand. Figure out how much money you will pay in interest. Is it equivalent to a new car? A down payment on a house? A nice vacation? Whatever it is, you don’t get it if you don’t pay off that loan faster than your loan term.
6. Sacrifice Now To Live It Up Later
Student loans, unlike mortgages or cars, are a finite debt, meaning once you’re done paying them, you’re done. Unless you already know you’re going back to school for something. In which case, best of luck to you! But again, if you’re anything like me, you’re not going back unless you’re sure it’ll help you in the long run.
At this point in my own career, I would be really surprised if going back to get an advanced degree makes any sense. So scrimp, save, and know that throwing money onto your student loan pile is better than a savings account. You’re buying your way toward financial freedom.
We call this front loading your financial life.
7. Don’t Live in the Past
Did you take out too many student loans? Did you get a degree you’re not using? Such is life, kids. You can wish in one hand and you-know-what in the other and see which fills up faster. (Did your parents tell you that or was that just mine? What an odd thing to say to a child.) Beating yourself up for paying to go to a culinary school when you would have been more marketable simply by taking a job in a restaurant won’t get you anywhere. Make peace with your past.
Now start paying for it.
What other tips do you have on how to deal with student loan debt?