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Student loans are a persistent and ever growing problem. The average amount of student loans for college graduates has typically gone up over the years, with the average amount owed in 2016 coming to $37,000. (It was only $35,000 in 2015.)
This is a real concern for many graduates. With rising tuition costs, many college students will take out loans to finance their education. And they’ll need a plan to pay off their debt once they graduate. It’s an overwhelming task, but not an impossible one. Consider these tips for paying off your student loans quickly.
Keep a Detailed Budget
No matter where you are in life, it’s important to keep a budget. If you will have to pay student loans after your graduate, include that in your list of monthly bills so you can prepare to make those payments in the future.
Some people feel restricted by the idea of a budget, but a well done budget actually gives you permission to spend money on those line items you’ve prioritized. All you need to do is write down your income each month, and then your expenses. Your student loan bill is an expense just like your rent, electricity, or phone bill. If you treat your student loans the same way you do your other monthly bills, you’re much less likely to miss a payment.
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Make Larger Payments
If you can afford it, making larger payments can help you pay less interest over time by allowing you to pay off your loans off faster. Some student loan providers even allow you to add on an extra amount to your payment each month. So if you usually pay $275 a month on your student loans, you could make it an even $300 and pay off the loan that much faster. Also, if you get a job that offers bonuses or wage increases, pretend that extra money doesn’t exist and throw it directly at your loans. All of these things will help you to pay off your student loans faster over time. You can also refinance your student loan or consider a student loan consolidation if your situation changes or if this would be better for you in the long run.
Open a Savings Account for Loans
Opening a savings account specifically for your loans can help you pay them off faster. For example, depositing just $20 every month could give you $240 every year to make one big extra payment. You could set an automatic transfer each month from your checking account. An extra $20 expense every month won’t break the bank, but it could make a big difference to your loan balance at the end of the year.
Learn more strategies for saving to make college a reality.
Think about your life in five years. Where will you live? What type of job will you have? What will you need to pay off your loans? Make a plan for your life and consider the outcomes of potential decisions. If you want to have children someday or buy your first home, having a student loan payment could prevent you from proceeding to the next phase of your life. While it may seem hard to pay off your loans more quickly than you are required to, it is possible. And it might be beneficial to the bigger picture of your overall financial well-being.