Monday, June 6, 2022

Surviving Student Loans & Paying Them Off Efficiently

Student Loans are a force to be reckoned with. Although they can help us secure an education, they are also considered a financial burden in many ways. For example, think of student loans as a second rent and an extra mortgage payment. Re-payments can cut deep into our present and future earnings. So, the question is, how can we best pay off our student loans and rid ourselves of the extra payments as soon as possible? The answer, it turns out is simple- pay on time and pay more than the minimum amount required. Reducing the time it takes to pay off student loans pays us back dividends in the long run. Not only will this help shorten the time of our debt, but it can also help increase our credit score.

Attacking our student loan debt requires patience.  Working on paying them off takes a large degree of mental fortitude. We may wonder if we possess that fortitude. The good news is we develop and strengthen our financial fortitude going through the process of formulating a repayment plan and then sticking to it.

The only way to finish off our student loan debt is to pay them off or have them forgiven in some way. What helps this process is to think about student loans as an expense that we budget for accordingly. It might be helpful to make a separate account where we allocate some portion of our money that goes toward the student loan debt each month.  We can make that money untouchable so we can better meet our goal of paying them off ASAP.  Building a separate account may allow us to better monitor how much are paying toward our debt and then estimate when we anticipate having the debt paid off.

​​Refinancing our loans to get a better interest rate can also help us significantly. “Unlike a federal loan consolidation, which combines your federal loans into a single loan, student loan refinancing can work for both private and federal loans” (McClanahan, Aja). Keep in mind, that the best refinancing options are generally offered exclusively to people who have a sufficient credit history because institutions like the consistency of people who pay on time, all the time.

Aja McClanahan, author of How to Pay Off Student Loans Fast recommends we take any tax refunds we receive and use them to pay off a good portion of our student loans. “When your next income tax refund (or any other financial windfall) comes, consider putting some, or even all of it towards your student debt.” Although the high volume of payments may initially appear daunting, beginning the process will encourage us over time to eliminate our student loan debt completely.

Each of these is an idea to keep in mind when approaching our student loan payments. Sticking to applicable principles can help keep us on track and make us happier knowing we are on time, on target, and comfortable with our student loan payment performance as we simultaneously handle our other day-to-day expenses. By exercising financial discipline in our repayment plan, our credit and payment history become more attractive to lenders when we need bigger loans for financial goals in the future. Believing in ourselves and our capability to stick to our financial plans can become a strength that serves us well.  

Here to help,

Your Financially Fit Me Team

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