Student loan debt has become necessary and can help to fund a solid start in life. However, it’s still a bit of a pain to see such sizeable chunks of cash disappearing from your monthly salary statements when you start earning. But it is important to pay that loan off because student debt can prevent future borrowing for important life events like buying your first home. If you’re considering the best way to pay off a student loan then here are a few smart tips to make the process simpler.
See the bigger picture
It’s always worth starting with an assessment of all the debt that you have as a whole. If your student loans have the lowest interest rates then it makes more sense to focus on paying off other debts, such as credit cards or personal loans, first. Remember that student loans can have much more preferential repayment terms so it may be worth funnelling your extra cash in another direction first to save money overall.
Start repayments as soon as possible
Many student loans offer a grace period in which you don’t have to make repayments. However, the smart thing to do is to bite the bullet and begin making repayments straight away once you have secured your first full-time job. As long as you can keep up with your other outgoings, the sooner you start paying the money back, the sooner the debt will be clear.
Apply your pay rises directly to your loan
As you start to move on from a graduate level position you’re likely to be rewarded with ever increasing pay increases. Even if these are small they can make a big difference to the length of time it takes you to repay your loan. Each time you get a pay rise, apply between 50% and 70% to paying off your student debt to significantly shorten the length of time remaining over which you need to make those repayments.
Make repayments a priority
Set your loan repayment schedule so that each monthly payment is made as soon as you receive your salary. It can be all too tempting to spend that cash on something more fun when you’re first paid – and just hope that there will be enough left to cover repayments later in the month. However, you could end up at the end of the month with purchases you didn’t really need and not enough money to cover the debt repayments. Prioritise where your money goes in terms of the order of payments – first rent/mortgage, bills etc and then your loan. Spend on extras from the money you have left.
Start some weekend work
It’s amazing how much of an impact a little extra earning can make. Just a small amount of extra income each weekend could give you something extra to add to your monthly loan repayment amount. There are many different ways to make a little extra cash on the side in today’s gig economy, from taking photos at weddings, to dog walking or selling crafts online. If you don’t want to do extra hours every weekend then you can earn the same by allocating one weekend a month to generating that extra cash.