Published on 6/08/2016
Written by: Stacia Getz
It’s 2016 and Americans are more burdened by student loan debt than ever.
You’ve probably heard the statistics: Americans owe nearly $1.3 trillion in student loan debt, spread out among about 43 million borrowers. In fact, the average Class of 2016 graduate has $37,172 in student loan debt, up six percent from last year. You can find more shocking student loan debt statistics on Student Loan Hero’s website.
Without student loans, many cannot attend the university that has high credentials or even best fits their career path.
Students can’t dictate what universities charge, of course. But they can practice smart financial management habits that help ensure they’re able to pay off their loans.
Students that choose to take out loans believe they will graduate with a job that makes paying back loans worth it. However, the college grad expects to make $40,000 or more and only a quarter of the graduating classes of 2014 and 2013 earned that much.
Whether you have a mountain of debt or several small loans, see these tips from Amber Trimple’s article that can help you pay off student loan debt. The full article can be found here.
1. Leverage online financial tools
Susan Bruno, CPA/PFS, and founder of College CFO, strongly suggested using free online financial tools such as Feed the Pig and 360 Degrees of Financial Literacy. Feed the Pig is an online tool committed to helping young people get control of all their finances—even beyond their student loans. The 360 Degrees of Financial Literacy website can assist you in creating a personalized plan that coincides with your current life stage.
2. Create a budget
Bruno recommended creating a budget that includes student loan repayment to help you see where your money is going and evaluate your spending. “Think about your wants versus your needs,” she said. “You may have to give up some of your wants.”
Not sure how to create a budget? One of America’s most famous financial experts, Dave Ramsey, offers a simple guide to getting on a budget. Many budgeting and money-tracking tools are available online that can help. For example, Mint is a money-tracking tool, while YNAB (You Need a Budget) is a budgeting tool. Mint is free, and YNAB is free for students—something to consider if you are currently enrolled in college or going back to school for a graduate degree. Another tool that can help you track your budget is a simple spreadsheet, Bruno said. When planning your budget, she advised prioritizing paying down higher-interest debt such as credit cards.
In addition to a budget, creating a repayment plan will help you pay off debt sooner. Plan on putting any additional income toward your student loan debt. You can even use Mint to set financial goals. Call your loan provider to ensure that your extra payment is going to the highest-interest loan. This will save you money on interest.
3. Seek assistance
If you’re still in college, check out financial resources—such as financial counseling—that are available on campus. Employers may also offer assistance. Reyna Gobel, author of Graduation Debt, said, “Always look to see what your company offers.” Business assistance for employees in paying for their MBA or helping them pay off their undergraduate loans is “becoming a trend,” she said.
Debt consolidation is another potential option—though it also could make you more overwhelmed with one large loan, instead of several small loans.
4. Make timely student loan payments to keep your credit score high
Depending on the type of loans, graduates may have a six-month grace period before they need to begin making payments. “Figure out what you can afford to pay on your student loans” during that period, advised Gobel.
That planning is crucial because, before long, you’ll need to be ready to start writing checks. Failing to make timely payments will result in all kinds of negative consequences, including harming your credit score for years.
“Your credit score is so important if you ever want to lease an apartment or buy a car—it’s a building block for your future,” Bruno added.
5. Find creative ways to save money
You can get creative by lowering your other bills. “Call your cellphone provider ... negotiate with the cable company,” Gobel said. It may not seem like a lot, but as she put it, “a few phone calls can do a lot” in terms of saving you money that you can put toward your loans.
Also, always be on the lookout for free or reduced-price products and services. For instance, borrow books from the library instead of buying them, or use websites such as Groupon and LivingSocial to find local deals.
6. Focus on the whole picture, not just student loans
Loans are just one aspect of your finances. Gobel advised setting up an emergency fund first with a total of one month’s living expenses. “Have that backup money,” she said. Later on, if necessary, you can use it to make your student loan payments.
Finally, it’s important to keep things in perspective. Gobel counseled that graduates need to get comfortable with the fact that this process takes time. “It didn’t take a day to build up the debt,” so it will take more than a day to pay it off, she said.