Student loans prevent a lot of recent graduates from saving money for their future. With financial rules changing all the time, getting a head start on saving becomes necessary for graduates. Because there is a lot to learn, organizations that help students manage debt are available, but many of us can get started on saving by using a few simple tips. Here are seven to get you started.
1. Keep Informed About Loans
What do you know about your loans? Student loans vary, so it’s important to know what kind of loan you have. Most loans come with various repayment options, and finding the best options to take will make your overall financial plan come together with ease. Make a list of who you owe and how much you owe. This will identify the best ways to handle your debt and give you a reference to use when making a budget.
2. Become Your Own Financial Advisor
After you have created a budget, take the time to manage it. You know your spending habits better than anyone, which gives you the power to modify your day to day transactions. Every little bit counts when paying off debt. Find simple ways to reduce your spending and use the money saved toward your outstanding loan balances. Good advisors look for tax incentives and deductions, so find out how you can use these to pay down your loans.
3. Don’t Stress Over Payments
Students in a tough job market find it hard to keep their payments current on their school loans, but they’ve found ways to make it easier on themselves. Some are choosing deferred payment options, like unemployment deferment, while others use income-based repayments to reduce their monthly bills and match what they can afford to pay. Both options will reduce any worries you might have regarding making your loan payments.
4. Avoid Loan Defaults
Loan defaults tarnish your credit for years and cost you money over time. In fact, defaulting on a student loan makes it difficult for recent graduates to get financially established. The ability to obtain auto and home loans suffer as a result of student loans in default because lenders decide your interest rates based on your payment history. Take action before your loan is in default.
5. Combine Debt
If you are having a lot of trouble saving money, debt consolidation might be your ticket out of trouble. This type of loan can give you a single payment for all of your debt, usually with a fixed rate. This helps a lot of people who find budgets overwhelming. As with any loan, the details make all the difference.
6. Pay Down The Principal
Another way to get rid of student debt fast is to pay down the principal of the loan. Whenever you can, pay more than the minimum payment on your loan. Making only the minimum payment increases the amount you will pay throughout the loan period and prevents you from paying off the loan fast.
7. High Interest Loans Go First
High interest loans equal wasted money. Students with private student loans will want to pay off these loans first since they carry higher interest rates than federal or state student loans.
