Student loan debt sucks. OK, maybe that’s a little harsh. Those loans did make it possible for you to get the degree that (hopefully) helped launch a promising career. But making those monthly payments for the next umpteen years – ugh. Seventy percent of college grads hit the real world with a debt load averaging $30,000!
We can’t wish that debt away, but there are ways to minimize its impact and speed the pay-off date. Here are 7 of the most effective debt management strategies and tactics:
Make your monthly payments automatic. If you miss even one payment on your student loan, there’s a good chance you interest rate will go up. Avoid this by arranging to have your payment drafted straight out of your bank account. You’ll never miss a payment, and you’ll avoid the psychological stress of actually writing that hefty check every month.
Consolidate and refinance. If you have multiple loans, you might be able to get a lower interest rate by combining them into one loan and refinancing. Shop around before you pull the trigger on this one. Refinance rates of 3% and less are currently available.
Pay more than the minimum. Paying an extra $100 a month on your loan will speed pay-off day as that money goes straight to your principle balance. Where will you get that extra money? Here are a couple of ideas…
Take a side gig. Yeah, we all thought we were done waiting tables when we graduated. But if you can squeeze a few hours of decent-paying work into your schedule, the proceeds could help put a serious dent in your debt.
Tighten that belt. Look at all your monthly expenses and see where you might reduce spending. Could you skip one happy hour per week? Ditch cable TV? Avoid Starbucks? Get a cheaper apartment? Earmark every dollar you save to pay-off debt and you could see a real difference in your loan balance.
Take a job that offers loan forgiveness. Some public service jobs, including teaching, may offer student loan reductions or forgiveness. Make sure you understand the whole deal before you sign-up for such a position. Forgiveness usually requires you to work a minimum number of years and meet other requirements.
Use unexpected cash to pay debt. Instead of going to Vegas with your next bonus or tax refund, set an intention now to use that money to drop a bomb on your loan balance. Do the same thing with that raise you’re expecting. Keep living on your current salary and apply that extra $40 or $60 per paycheck to your loans.
Some of these steps may put a temporary crimp in your spending and lifestyle. But it’s pain worth the gain. Debt is the worst. It limits your current spending options and hurts your ability to build for the future. The sooner you’re debt-free, the happier you’ll be.