How to Pay Off Student Debt

Nearly three out of every four students graduating from a four-year college or university will have some sort of debt.  Despite the fact that college is supposed to be some of the best years of your life, paying off your student debt after you have graduated can seem like a mountain too big to climb for many.

How to Pay Off Student Debt

According to a recent Forbes article, the average student graduating from college has over $37,000 in student loan debt.  This number is expected to continue increasing due to the constant hikes in college tuition throughout the United States.  Whether you have graduated or are about to graduate from college with debt, there are ways to help you manage the financial burden.




Example 1 on How to Pay Off Student Debt:

Susie went to a four-year state school.  Fortunately, she had academic scholarships to help pay for schooling, and she also lived at home during the four years.  She graduated with $10,000 in student debt.  Susie was able to get a job right after school in the town where she went to school and where her family lived.  She continued to live at home and made a budget.  Susie focused on keeping her expenses low and used every bit of extra money she had left over in her budget to pay towards her loans.  Most importantly though was that she included a category in her budget for paying off her student loans each month.  She devoted $500 per month towards her student loans.  Because of her frugal living and her devotion to get out of debt, she was able to pay off the entire balance of her loans in less than two years!

Example 2 on How to Pay Off Student Debt:

After graduating high school, Chris decided to attend a private university to continue his studies.  The tuition at his university was expensive, but with the help of aid and an alumni scholarship he was able to limit the costs.  Regardless, Chris graduated with $45,000 of student debt after it was all over.  Chris accepted a job with a non-profit after graduation.  Even though he wouldn’t be making much money, he felt a calling to do something he passionately cared about.  Because of his situation, a high amount of student debt and a low salary, he enrolled in an Income Based Repayment Program.  This allowed Chris to avoid the high monthly payments his loans would typically have required him to pay and instead allowed him to pay a small percent of his income every month.  Even with this program, Chris still had to create a budget, but the repayment of his student loans was not as high of a priority as it was for Susie.  Nonetheless, Chris was able to still live comfortably, doing what he loved, while also meeting his student loan obligations.

The examples above illustrate a couple of real-life situations that people face when paying off student debt.  To some, paying off the debt is a very high priority.  To others, not so much.  Only you can decide how quickly you would like to pay off student loans.  The commonality that both Susie and Chris shared in both examples was that they created a budget.  Susie created a budget that allowed her to aggressively pay off her debt.  Chris created a budget that allowed him to live within his means but also meet his payment every month.  Regardless of which category you fall in, creating a budget is a great foundation to tackling any debt, especially student loans.

Student Loans No More

 

It took me a total of 30 months, two and a half years to pay off over $30,000 in student loans, but it has been done.

My student loans were financed out for 10 years, which is typical for these loans.  However, I paid them off in just 2.5 years.  How did I do this?  Dedication, commitment.

It is never easy seeing the majority of your after-tax income go towards something that has already been purchased (tuition) and you don’t see the financial rewards until many years down the road.  Bonuses I would receive were also mostly put towards paying down this debt.

My loans carried a 6.8% interest rate.  It was because of this that I was so adamant on paying them off as soon as possible.  That and the opportunity to put that money into additional investments for my future.

Student loans among recent graduates are at all time highs, and so is the price of college tuition.  I’m glad I got out when I did and don’t have plans to paying for education again.  I can breath a sigh of relief, because I know there are others out there with much more debt they have to repay.

I remember a criminal justice class I took back in college where the professor said that the only two for sure ways to get turned down for the FBI were if you had a felony or if you defaulted on a student loan.  I’m not sure if that is 100% true, but I do still preach that fact to others today as if it is.

Debt is a big burden no matter what kind of debt it is.  Most young people and college students don’t understand what they are getting themselves into when they enter college.  They don’t realize that the thousands and hundreds of thousands of dollars they borrowed for their education will have to be eventually re-payed with their salaries.

However, with all that being said, I am glad I went to college.  I wouldn’t have had the career opportunities or money had I decided not to go, but that was never an option.  Student loans are a fact that you have to accept if you are already entrenched in the college life.  For those of you graduating, there are steps you can take to help get yourself off to the best financial start possible.  If you are interested in getting your financial life off to the right start then email me for a Financial Foundation Consultation.  I will go over anything you need me to: budgeting, debt burden, buying a house, where to invest, etc.  Consultations can be done over the phone or via webcam.  If interested email me at johnwsteinert@gmail.com

Budget Smart, Invest Wise

The Student Loan Mistake to Avoid

With many fall graduates moving forward with their future lives after college it is now time to get your financial future off to the right start.

If you have a job already then great, step 1 is learning how to budget your salary.  Find an example budget on the “Your Monthly Budget” page on the blog.

If you have debt, then tackle it and don’t get into further debt.  This means don’t go out and purchase a new car or max out credit cards.  Your first paycheck is often times the biggest one you have seen to date, so that is why it is vital to create a budget.

Student loans often come with a deferment period of 6 months after you graduate.  This is basically a way for the loan company to say: “Enjoy getting your finances in order while we charge you interest that accrues on a daily basis”.  I made the mistake of not making a loan payment during my 6 month deferment period, and it ended up costing me hundreds if not thousands of extra dollars.  Paying off student loans and debt in general is essential in beginning one’s finances.  Don’t wait for the deferment period to pass.

The benefits of beginning to make student loan payments during the deferment period are enormous… Save money on interest, and paying off student loans faster!  Learn from my mistake and save yourself time and money.

Remember…

Budget Smart, Invest Wise