The average student has about $37,172 in student loan debt and other related education expenses. Now that you’ve finished school and are faced with these staggering numbers, what can you do to manage your debt? With student loan debt on the rise, many graduates are left wondering what they need to do to improve their financial situation. Still, they are struggling with managing the high costs of returning to school, in the hopes of landing a higher-paying job. Students are also facing additional challenges like juggling a full time job while going to school at night, or living paycheck to paycheck while trying to pay their way through school.
The good news is that there are a number of habits you can practice that can help you manage your debt.
Here are 8 habits to follow:
Make a budget – and stick to it
One of the smartest things you can do when dealing with student debt is to make a budget. Determine how much money you need to live on each month, and then make sure you stick to it. This will help you stay on top of your finances and avoid getting into more debt.
Refinancing is when you get a loan with poor credit to pay off your existing loans. This can be a good option if you’re able to get a lower interest rate. Before you decide to refinance, there are a few things you should consider. First, you’ll need to research different lenders to find the best deal. Once you’ve found a lender you’re comfortable with, you’ll need to fill out an application. Be sure to include information about your current loans, as well as your financial history. Once you’ve been approved for a new loan, you’ll need to sign a new loan agreement. This agreement will outline the terms of your new loan, including your interest rate, repayment term, and monthly payment amount. Be sure to review the agreement carefully before signing. If you’re struggling to make ends meet, refinancing your student loans could be a good option. Just be sure to do your homework before you sign on the dotted line.
Live below your means
If you want to get ahead of your student debt, it’s important to live below your means. That means spending less than you earn each month. It might mean making some sacrifices, but it will be worth it in the long run.
Pay more than the minimum payment
If you only make the minimum payments on your student loans, you’ll be in debt for a long time. To get out of debt sooner, try to pay more than the minimum payment each month. Even an extra $50 can make a big difference over time.
Understand Interest Rates and Loans
It is crucial that everyone understands their student loans, whether they’re government or private. Shop for an online loan calculator that will show you how much interest is charged on your loans. The price difference between federal and private can be thousands of dollars! Shop for a variable rate or a fixed rate. If you choose a variable, shop for a low interest variable rate (less than 4%).
Set Realistic Expectations
If you’re taking out student loans, it’s likely that you’re going to need to take out more than you’ll be able to pay back in the end. For some students, this means choosing less expensive schools and others may have to work while also attending school. Either way, it’s important that you understand how much debt you’re taking on before signing any loan documents.
It’s tempting to think of your debt as a short-term problem that you can tackle right away. The reality, however, is that it will almost certainly require a long-term solution. So instead of thinking of ways to tackle your debt on the fly, look around you and see what resources you can use to build a solid safety net for yourself.
Discover the Best Repayment Plan for You
The type of loan you have and your repayment plan will determine how fast your debt will be paid off. Federal student loans have repayment options that range from the Standard 10-year Plan to the Graduated Repayment Plan and more. Private loans can also have various benefits, such as flexible repayment plans, forbearance and deferment. The best way to manage your student debt is to focus on the highest amount first and minimize interest.
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