Congratulations on graduating from college. Now it’s time to begin the next phase of your life, find a full-time job, and start paying off your college loans. The truth is paying off student loans is just like paying off any other debt — all it takes is a little bit of discipline and a whole lot of budgeting.
Here are 4 steps to help pay off your college loans:
Calculate how much you owe
You have most likely already received a loan statement showing the total amount borrowed and the current interest rate, as well as the minimum monthly payment. That’s a great start to calculating your current financial state. The second step is to choose your student loan repayment option.
Students are automatically enrolled in a standard default repayment plan, but you actually have several different options when it comes to paying off your loans. Visit the Federal Student Aidoffice and figure out which option is best for you. Hint: The more you pay, the faster you can retire the debt!
Set up automatic payments
The best way to ensure you never miss a student loan payment is to set up automatic transfers from your checking account to your student loans on a weekly, biweekly, or monthly basis. In order to ensure that you always have enough money in your account when you do this, make sure to sync up these payments with the same schedule as your paycheck. You can change the payment amount and frequency any time by contacting the student loan provider i.e. your school, bank, or credit union.
Give yourself a debt free date
Depending on the type of repayment plan you choose (or are eligible for) the college loan repayment period can be between 10 to 25 years. That’s a long time to be in debt. The longer you take to repay your debt the more interest you’ll incur. The faster you pay off your student loans, the quicker you’ll get out of debt and the more you’ll save on interest. Pretty simple, right?
In order to achieve this lofty goal, you should set a debt free date when you want the entire balance to be paid off. Use this repayment estimator calculator to determine how your student loan payments will fit into your budget. It will also help determine how long it will take to pay off your loans based on your payment amount and balance owing. You may be able to pay off your student loans a lot quicker than you think if you’re smart about your money and are willing to live frugally.
Add a little bit extra
I know the idea of paying off debt can be scary, especially if you’re also paying rent and supporting yourself for the first time. Before getting freaked out, just sit back and think what you received in return for getting into debt…you got an education. When it comes to repaying college loans, every little bit helps. If you can add an extra $20 per week onto your repayments you can watch your balances get paid off a lot faster. Just think about all the other things you can do with that money once your student loans are paid off. We see a new Alexander Wang bag in your future…