Still paying your college debt? You’re not alone. It might not be easy, but there’s plenty you can do to recover with minimum damage. Here are our top tips.
If you’re a college student or college graduate with debt, you’re not alone. studies show that almost 70% of Americans graduate with college debt, and college graduates are spending nearly one-fifth (18 percent) of their current salaries on student loan payments. Here’s what you can do to become debt-free.
First, Manage Your College Debt Better to Minimize its Long-Term Impact
1. Prioritize Loan Payments
The longer it takes you to pay off your college debt, the more you’ll pay in interest rates. If you’ve borrowed money from multiple places, list them all down. Write down how much interest you pay for each. Make your #1 goal to pay off the debt with the largest interest rate first. When you’re done with that, move to the second most expensive debt on the list, and so on.
2. Pay More than the Minimum Monthly Payment
Another way to decrease the amount of overall interest you pay is to pay more than the minimum monthly payment whenever you can. Got a bigger tip than usual at work? A holiday bonus? Use it to pay off your college debt. Plus, if you know that close friends or family members are planning to buy you a holiday or birthday gift, consider asking them to give you the money instead, so you can use it to pay off your college debt.
3. Negotiate Interest Rates
If some of your college debt is on credit cards, see if transferring your debt to another bank can lower your interest rate. Compare what multiple banks have to offer you, then go to your bank and see if it will offer you a better interest rate, so you’ll stick around. If your bank says yes, take the new offer to the other banks and see if you can get an even better offer. This could potentially save you hundreds or thousands of dollars down the line.
4. Consider Transferring to a more cost effective University
If you’re still a student and your college tuition is expensive, consider shopping around for a more cost effective university that will let you transfer all or most of the credits you already earned in your current degree. If you’ve already graduated, but you’re looking to get a master’s degree, consider a more cost-effective university as well. Another option is, to choose a tuition-free university. The University of the People, for example, offers both undergraduate and graduate degrees without charging for tuition. It’s an accredited American university, with professors from the top universities in the world, and 80% of graduates work in a job that’s related to their major.
Second, Make These Changes to Your Life to Pay off College Debt Faster and Live a Debt-Free Life
Now it’s time to look at your life, and see what changes you can make to support your long-term financial goals.
5. Earn More Money
If you’re still a student, you can work in a full-time or part-time job, or you can also try finding an internship that pays for grants for college. Working during college – preferably in your chosen industry has an advantage when you graduate. If you’ve already graduated, think about how you can increase your income – you can ask for a raise, find a better paying job or take an additional part time online job.
6. Don’t Accumulate New Debts
Make it easier on yourself by not taking on additional loans. Take into consideration that you’ll likely have big expenses down the road, and you won’t be able to anticipate all of them. Set aside money for big expenses and emergencies now, and do that regularly. This way, you’ll have the money to pay for things that come up, and won’t need to borrow it. As a result, you’ll save on the loan’s interest rate.
7. Write Down Your Expenses and Create a Budget
Writing down your expenses lets you easily see how the little expenses add up, and what will be the simplest way to save some money. Once you are aware of what you’re already spending, you can create a budget for the next month or year. Planning your income versus expenses in advance will help you make more money-conscious decisions and avoid overspending.
8. Sell Your Stuff
Make a list of stuff you could potentially sell. For example, if you have access to the internet, you can watch TV on your computer or phone, and sell your TV. If you have a car, you can exchange it for public transportation, or at least look for a more cost effective car. A great blog to get some inspiration is Man vs. Debt, where the motto is: “Sell Your Crap… Pay Off Your Debt… Do What You Love.”
10. Change Your Living Situation
If your living alone, consider moving in with a roomate or moving back in with your parents for a pre-determined amount of time. Another option is to move to a different city or a different neighborhood if it will save you on rent.
11. Find More Cost-Effective Ways to Enjoy Life
See how you can still enjoy life without spending as much. For example, have a picnic instead of going to a restaurant, exercise in nature instead of the gym, subscribe to Netflix instead of cable and use Whatsapp and Skype instead of SMS and phone calls.
You Can Recover from College Debt and Become Debt Free
Remember that you’ve overcome challenges in your life before. Remember that you set a big goal to get a college education, and you pulled it off. Follow the steps in this article, be patient but determined, and you too will be able to live a debt-free life.