Are you riding the student loan struggle bus? Do you feel buried in loan debt and unsure that you’ll ever be able to escape? Well believe me, I know the feeling well. If you haven’t experienced it firsthand, I’m not sure you can fully understand how horrifying it is to have student loans more than 5 times your annual salary and over $30,000 more than your mortgage. Lucky for you, I’ve been there. As a matter of fact, I’m still buried in student loans and trying to dig myself out. The good news is that in the 5 years since I graduated college I have made progress and I’ve learned some tips and tricks about how to figure out what you owe, how to make a game plan and how to stay motivated even when getting rid of the debts seems impossible. In the last 6 months I’ve made extra payments and been able to knock over $15,000 off of my loan balance. And if I can do it, so can you.
Part of the challenge with the student loan struggle is that you probably have more than one loan at more than one interest rate with more than one payment due date. So first things first, figure out where you are. I created this FREE Student Loan Worksheet and Student Loan Payoff Tracker to keep track of where you are and watch your progress. Watching the progress month over month or even seeing the change over 6 months can be really motivating and can help you stay on track. There are days and even months when I don’t feel like my loans are getting any smaller, but when I look at my balance from 6 months ago and see that now it’s $15,000 less, I’m motivated to keep going. Once my loans are paid off, I will have so much more money available to do other things with. That could be saving, investing, or working towards my next big picture budget goal.
Once you know what loans you have and what payments are due, figure out if you earn enough money to pay your monthly minimum payment amounts. If not, give your lender a call to explain your situation and see what options they have to help. If you have federal loans, see if you qualify for any Income Driven Repayment (IDR) plans which recalculate payments based on a percentage of your income. It’s always a good idea to pay more to your loans if you can, but you never want to be in a position that making your loan payments is a challenge every month if there are other payment options. If you still do not have enough money to pay monthly minimum payments, read 8 ways to increase your income and read 8 ways to lower your expenses. If you can earn enough for your monthly minimum payments, that’s great!
Once your monthly minimum payments are doable, I recommend you look at your interest rates and consider refinancing. Using sites like Sofi or LendKey, you can enter your information and determine what rate you qualify for. Once you have the rate you will qualify for, see how many loans you have at higher interest rates and only refinance those. Be cautious if you refinance any federal loans as rolling them in with private loans will make you lose certain benefits. Also make sure to do your research if you’ve recently finished school and your loans aren’t currently in repayment because refinancing them may make you lose your 6 month grace period so it might be better to wait until they are all due. If you do refinance, update your Student Loan Worksheet to reflect the current loans.
Next, set all your loans up on auto-pay from your bank account. Some lenders will give you a discounted rate for enrolling in autopay. It’ll also make it so you won’t accidentally miss payments. Paying your minimums is the first step. Then if you have any extra money you should pick a loan to focus on. How do you pick one? There are two different popular methods: the debt avalanche and the debt snowball.
The debt avalanche says that you should pay off the loan with the highest interest rate first. This one makes the most sense if you look at the numbers, but it doesn’t feel as if you’re making as much progress. The second option is the debt snowball which says that you should pay off the loan with the lowest amount owed first. This one makes it easier to see your progress and feel like you’re making strides to get out of debt. You just have to weigh the options and see which makes the most sense for you.
Unfortunately, there is no quick solution to get rid of a large amount of debt. You just have to make a plan and stick with it. Make sure that you celebrate your wins no matter how small. Personally, my now husband and I toasted with champagne when my student loan balance hit under $100,000. As of May 2018, my balance is just under $65,000 and even though progress is slow, I am still making progress. Just remember that you can reach your goal. One step at a time and slowly but surely your stop on the struggle bus will come and you can get out from under student loan debt.
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