It’s that time of year where ghosts and goblins roam the streets and children accept candy from strangers, no questions asked. Perhaps the most frightening thing of all doesn’t take place on October 31st but once a month (or more) and seems to suck up most of your paycheck faster than a vampire — your student loan payment.
Student loans need to be brought down to size, but luckily, they are like any other debt in a lot of ways and the basics still apply when paying them off – know what you owe and pay your bill on time. Unlike other forms of debt, student loans are a unique beast: you don’t have anything tangible to show for what you paid, like you would with a house or car. Interest will begin to accrue once you sign your loan agreement, which means your loan balance is growing while you’re still in school. And once you begin repayment, the principal balance seems to stick around longer since payments are generally structured to pay off accumulated interest before they are applied to your principal. This is why making in-school payments can be so beneficial and help you get out of debt faster and at a lower cost to you. Student loans don’t need to be scary! With the right tools, you can face your loans head on and get out of debt faster.
Student loans can hit you from all directions like tentacles on a creature of the deep. You just made a payment and the very next week, another one is due. Psychologically, it can seem that all you do is eat, sleep, work and pay your student loan bill. Consolidating through the free federal program or refinancing with a private lender can help you face the challenge of paying down your loan by giving you one monthly payment to focus on.
When plotting out your repayment strategy, you will need to know what you are up against. Is this a big hairy monster that seems impossible to defeat no matter how hard you try? Don’t give up, and know your best plan of attack. Take on smaller parts first that are easier to handle and weaken your challenger. Have a smaller loan that you can pay down in less than a year? Make minimum payments on everything else and focus on your strength to knock out that smaller loan. This is commonly known as the snowball method for paying down debt. Taking one loan down can make you feel like a million bucks and boost your momentum to pay off the rest of your student loans.
Another strategy is to refinance all of your loans together — not as many tentacles to keep an eye on and you’ll only have to remember one monthly payment. This shrinks your monster by lowering the interest rate on all of your loans and getting you on a more favorable term, which could be longer or shorter depending on your needs. You could shorten your term to get out of debt faster, or lengthen your term and make your monthly payment smaller and more manageable. It’s important to know that when you lengthen the loan term to lower your payment, you will end up paying more interest over the life of the loan. But if you use that freed up cash flow wisely, such as saving for retirement or investing, it may be worth it. Each financial situation is unique and student loans are no exception. Think about your goals and plan accordingly.
This Halloween, don’t be afraid of your student loan — take it on with Purefy.