There are tons of tips for managing debt that can apply to your credit card, auto debt or student debt. For this post, we focus specifically on our 5 favorite tips for managing student debt. These 5 tips will help to pay off your loans faster, save money on interest costs and get you organized.
Tip 1: Tracking – If you have multiple student loans either because you haven’t refinanced yet or wanted to keep some of your private or federal loans, create a simple spreadsheet that has the loan amount, the payment term, the monthly payment and the interest rate. Little things like calendar reminders every month or a reminder on your phone will keep you organized and help you pay down those loans faster.
Tip 2: Pick a strategy – The snowball or avalanche strategy are two of the most popular debt pay down strategies. Both are simple and easy to apply to your student debt. Here is a quick summary of each:
Avalanche: Using your spreadsheet, sort your loans by interest rate (high to low) and put any extra cash towards the highest interest rate loan while making the minimum monthly payments on the other loans. You will save in interest by paying off the highest interest loan first with this method.
Snowball: Using your spreadsheet, sort by balance (low to high) and pay off the lowest balance first. This is a good way to get rid of a loan completely and reduce the burden of having multiple loans to pay off.
Click here for more on these methods and other strategies.
Tip 3: Automatic payments – Automatic payments are a quick and easy way to start your journey to paying off your student loans. Most lenders will let you set up automatic monthly payments with any bank account. Setting up automatic payments for your finances can help you stay on track and avoid missing a payment.
Tip 4: Refinance – We write about the benefits of refinancing a lot but an often-overlooked benefit is a practical one – one monthly payment for all your loans. When it comes to managing student debt, one monthly payment is easier to manage than several. Of course, the interest rate savings is the main reason people refinance with us, but consolidating is an added benefit to get all your loans on one monthly payment (and one low-interest rate).
Tip 5: Make mini goals – Working towards a short-term goal will help you stay motivated. For example, try to pay more than the minimum monthly payment for 6 months in a row. Little victories make a big difference in how quickly you pay off your loans and you get the added mental boost of meeting mini goals to reach the goal of getting out of debt completely.
Student debt is a burden because you don’t have something tangible to show for it, besides that piece of paper that you meant to get framed ages ago. Even though student loans feel different that other types of debt, similar strategies apply – cut costs where you can, get on a plan and manage payments wisely. What are some of your favorite tips for managing student debt? Let us know on Twitter @Purefy.