Graduating with a degree is an amazing achievement, one which can open valuable doors professionally and financially. But when you look at the student debts you have stacked up, the road ahead may look endless.
Try not to get discouraged. No matter your situation, there is a lot you can do right now to work toward getting those loans paid off faster than you expect.
Can you really do it within 5 years or less? That depends on a lot of aspects:
The tips below should help you out with paying off your student loans as fast as possible no matter where you stand!
If you haven’t already, learn the process for calculating student loan interest. Figure out exactly what you owe now and how much it could feasibly compound over different time periods.
While you are at it, do not forget about other types of debt you may owe. Do you have high-interest credit card debt or other types of debt which could actually be more expensive?
Consider taking care of these debts quickly, even if that means that it takes you a bit longer to pay off your student loans.
Finance writer Susan Johnston Taylor (@UrbanMuseWriter), at US News & World Report (@usnews) suggests, “Look into refinancing. Refinancing student loans may help lower your interest rates… However, keep in mind that there could be origination fees or other costs associated with refinancing, so make sure you’ve calculated the total cost of the loan, not just interest, before you refinance.”
While you are considering refinancing, also see whether consolidating some of your debts through a personal loan could also reduce your overall interest and simplify your financial life.
Incidentally, Taylor also adds, “Some borrowers may also qualify for loan forgiveness or income-based repayment programs, but income-based repayment may stretch out the payments rather than accelerate them.” So this is something else to check into.
Do you track all of your income and expenses each month? If the answer is “no,” you are not doing everything you can to get your student loans paid off in a timely fashion.
Keep a careful log of everything you are earning and everything you are paying each month.
This will tell you whether you are spending your money efficiently or not, and it will give you some clues as to how you can reduce your other expenditures to pay off your financial aid for college for more quickly.
Once you have started tracking your budget, look for all possible ways to reduce your expenses to a minimum. This might mean:
One expense a lot of people don’t think about is their commute. Not only do you spend lots of time going to and from work (and not getting paid for it), but you also have to spend a lot on gas.
Banker Tran Chau (see his profile), who blogs at Smart Money and Travel (@SmartMoney_Trav) after work, describes how he solved his problem: I decided to live close to the office. I hate long commutes, and at my first job in Chicago after undergrad, I took a taxi to work 90+% of the time. By living close to the office [at a future job], not only did I remove the urge to Uber to work every morning, but I also didn’t need to buy a transit pass, saving $100/month.”
After cutting down some expenses, the next step is to try and increase your income. This could take any number of forms. In some cases, it might mean going the extra mile to get a few promotions at the workplace.
In others, it could mean looking for a side hustle. Increasing income typically is more difficult than reducing expenses, so be patient with this. It may take you a while to get it figured out.
Try and resist the temptation to put all of your extra money each month toward your student loans. While you should prioritize them, you have other concerns to take care of as well. If you do not have an emergency fund, for example, that is something you need to get squared away first. You also should start saving toward investments and retirement.
It can be a challenge to stay the course with student loan repayments when your peers are spending recklessly. Jeff Clark (see Jeff Clark’s Profile), an Investment Adviser Representative at BrightPlan (@mybrightplan) writes about this while recounting his own student loan repayment journey, recalling, “The stock market soared and I wanted to invest. Friends traveled to Europe and I envied every selfie. I fell in love and wanted to visit San Diego every week.”
How did Clark stay inspired? He writes: “Friends learned about my goal and cheered my progress. Stories and podcasts from others working to become debt free provided hope and practical tips. Absorbing tales of sacrifice from others reassured me I wasn’t crazy and carried me along when I wanted to give up.”
In short, your journey may inspire others — and it should motivate you, even when the going gets tough. The financial skills you pick up along the way also should have a lasting positive impact on your future.
The financial decisions you make now will have a huge impact on how fast you pay off your student loans.
You now have a number of tips for how to repay student loans. Whether it takes you one year, five years, or ten or more, the actions you take now and over the years to come will in large part determine how long it takes you and how much interest you ultimately end up paying. Good luck!
Susan Johnston Taylor (@UrbanMuseWriter), as a contributor to US News & World Report (@usnews) for more than 7 years, writes about a variety of financial topics ranging from insurance to loans. She also has been published in The Boston Globe, Entrepreneur and other major publications.
Tran Chau (see his profile) has been working in the financial industry for a dozen years on and off. He maintains a blog called Smart Money and Travel (@SmartMoney_Trav).
Jeff Clark (see Jeff Clark’s Profile), an Investment Adviser Representative at BrightPlan (@mybrightplan). He is also a a digital financial advisor who provides regular investment advice to readers online through Quora.