When you graduate from college or university and embark on your chosen career, it’s a good idea to start investing in your retirement from day one. While that may seem like the perfect plan on paper, actually making it happen is incredibly tough, usually because college graduates are left saddled with a student loan that can be totally crippling.
Continuing your education in today’s world means shelling out tens of thousands of dollars, which ends up resulting in large monthly payments once you graduate. It’s a tough debt to pay off, but there are a few ways you can get it paid down sooner rather than later:
Treat The Loan Like A Mortgage
Homeowners paying down their mortgage know that there are several ways to pay the debt off faster. These include paying bi-weekly as opposed to monthly, or paying extra towards the principal each month. Every little bit that you can pay over and above your minimum payment helps reduce the amount of time that it will take to become totally debt-free.
Create A Budget
Talk to your lenders about what amount you would need to pay to have the loan paid off in a specific amount of time or look at options for refinancing your student loans. 5 years is usually a pretty reasonable timeframe in which to get the job done. You will know exactly what needs to be paid each month to get the loan paid in that time, and you can then budget accordingly. Having a clear end date in sight is often very motivating, and can make it easier to sacrifice on luxury items for a relatively short period of time.
Establish A Separate Repayment Fund
You can establish a separate account at your bank to which a percentage of your earnings are automatically transferred. This account should be a reinvestment type deal where your money can quickly grow. Once you hit a nice little lump sum, that money can then be used to pay down your principal, shaving off a huge chunk of repayment time in the process.
Many students take on a part-time job while they are in college. While some of that is sure to go towards tuition and living expenses, you can also save some money that will quickly add up and make it possible for you to pay off a portion of your loan right out of the gate. Attending college close to home and living with your parents may not seem like the college dream, but it can help you start your career on more stable financial footing.
Getting sucked into bad financial choices is the easiest way to fall off the budget bandwagon. Do you really need the newest cell phone, or do you really need to eat out at a good restaurant 3 or 4 times per week? We are not saying that you cannot ever treat yourself, but try to stay on budget by limiting how often you make those decisions.