One of the most difficult thing that millennials have to deal with, when it comes to their financial future, is the very real burden of paying of student loans. Being stuck with these loans often prevents young graduates from investing money or even getting their own homes. In a nutshell, student loans often feel like financial anchors that will never go away to the people who are stuck paying them off. In fact, the Federal Reserve Bank recently released a report that tallied up the average outstanding college loan balance at a whopping $24,301 – with 10 percent of borrowers stuck with debts that exceed $58,000.
Are you looking for tips on how to pay off your student loans faster? What follows are some tips that financial advisors often pass on to their clients to help them pay off their student loans, while maintaining a semblance of a normal life.
Consider Your Student Loan to be Like a Mortgage Loan
If you have a good job and are bringing in a steady income, you can treat that student loan debt the same way you would a big mortgage. Make efforts to make larger monthly payments. This helps to reduce the loan principal at a faster rate. If a student had $25K in student debt with 6.8 percent interest fees and a 10 year loan term, the payment each month would be about $288. However, if the borrower were to pay back $700 each month, the loan would be paid off completely in just a little more than three years. Paying down the principal on loans with larger payments allows borrowers to enjoy paying less interest on the loan.
Create a Plan to Eliminate Student Debt
Too many graduates just pick away at their student loan debts and complain about them to anyone who will listen. Instead of taking this approach, create a detailed plan to get rid of that debt that is hanging over your head. Break down the total amount that you owe, and come up with 3 and 5 year plans to help eliminate the student loan debt. You should break out your budget while you do this, so you can find other expenses that can be reduced or eliminated, so you can throw that money at your educational debt instead. Map out the next few years of student loan payments in detail, and then break down the large loan amount into smaller, more manageable monthly chunks to make the debt seem less overwhelming.
Set Up a Student Loan Repayment Account
It’s always possible for people to save a bit of extra money every month. Even if you can just get an extra $100 together after all the bills are paid, you can deposit that extra cash in an account that is completely dedicated to paying off your student loan debt. Establish a separate account that is ONLY for saving funds to pay off the educational debt. If you put the extra cash in your existing checking or savings account, it may be too tempting to spend the cash on other things.
Once you get your student loan debt paid off, use that extra money each month to invest and plan for the future. You worked hard to get your education and to pay off the loans that helped you to afford that education. When you are free from the educational loan debt, you’ll be able to breathe easier, and you’ll be able to get on the fast track to saving money for a better financial future.