By Kayleigh Yerdon, Cornell University Let’s face it – as each year goes by, the average student loan debt of graduating college students rises. It’s getting harder and harder for Americans to pay for education. Subsequently, facing the requirement to repay greater loans, it gets harder and harder each year for young people to invest their money. According to MarketWatch, 70% of bachelor’s degree students graduate with debt – and that debt averaged $35,051 for the class of 2015. Even more notable is that the average debt for the class of 2015 was some $2,000 higher than that of the class of 2014.
As student loan payments increase, the amount of money you feel comfortable adding to your investment portfolio might decrease. With that in mind, here are our best tips about efficiently paying student loans so that you can feel free to invest the way you want to:
- If you can afford it, make larger payments as soon as you can.
Get your payments out of the way. The more you pay back as soon as you get out of school, the less you’ll have to pay back later. Furthermore, by putting money down as quickly as possible, you’ll reduce your interest charges and actually end up paying less in the long run.
- Even if you can’t make big payments right away, don’t ignore the debt.
You can’t just forget your debt is there. If you pretend it’s not there, it doesn’t go away (even if we wish it did). Instead your first step to address your student loans should be to:
- Read all of the material regarding your loans and keep things current.
In order to be able to address your student loan payments properly, you first need to understand them. By reading all of your bills and paperwork, you might be able to find useful information about how much you should pay and the best ways to pay it. Furthermore, by staying up to date with how your payment plan works, you can make sure that nothing changes without you noticing and remember to make your payments on time.
- Schedule your payments out in advance.
The next step in this plan is to actually make a plan. Know your income, your living situation, and your necessary expenses and set out exactly how much you’ll be able to pay each month. Use repayment calculators or financial advice if you need to. This step will require discipline and potentially sacrifice, but having a plan will make your future payments much easier.
- If you’re still in school, start saving RIGHT NOW.
You might be thinking, “oh, none of these tips apply to me, I’m still in school”. Pause. Stop reading this article. Go grab $5 out of your wallet and put it into a jar. As we like to say with saving, sometimes out of sight means out of mind. Since you won’t be carrying that money around with you, you’ll be less tempted to spend it on the little things. Even better, you’ll have started your fund to repay your loans. In fact, you might even want to start a schedule for yourself to add money to your savings jar each week. In the grand scheme of things, every little bit you can save now will help later.
- Learn to live in the moment without spending crazy money.
For most of us young investors, we find ourselves trying to “live in the moment” and enjoy today – which is great. But, this also inevitably rakes up unexpected costs. While we totally encourage “living in the moment”, try to find fun things to do without breaking the bank. If you’re looking for some good ideas, try some of these.
- Talk to your employer.
Some employers have programs in place to help employees repay their student loans. If you have the option to get help, why not take it? Talk to your HR representative – especially if you’re a government employee – to see if you’re able to get any assistance with your loan payment.
- Most importantly, keep a positive attitude.
Student loans may seem like a looming burden – but keeping a positive attitude, playing all of your angles, and sticking to a plan can make repaying debt a little less painful. Trust yourself – you can do this!
At the end of the day, the first step towards paying your student loans faster is you. By taking initiative now and gearing yourself up to make some sacrifices, you can lighten your burden for the future. What’s more important is that lightening your student loan burden can actually help in two ways, as you’ll then be better prepared to invest your money!