Rules that Helped Me Pay off Student Debt in Under a Year
Paying off student loans is one of those things that seems to stick in the craw of many a young adult. Many of them just don’t seem to have the knack for figuring out how to do it, and it shouldn’t be a concept that — especially after a quality college education — is that difficult to grasp.
Here are some of the rules that helped me pay off my student debt of around $8000 in under a year.
Understanding My Debt
It might sound somewhat silly, but I don’t think every student that comes out of college knows as much about their debt as they should. They know they have it, they know they need to pay it back, but the specifics remain somewhat of a mystery.
Upon graduation, I ensured that I was aware of the interest rates associated with my loans, payoff amounts, any grace periods involved, and whether I could make payments in advance without penalty.
Leave School with a Plan
I also left school with a plan regarding my student debt and how to tackle it. Since I had a six-month grace period, I planned to work, save as much money as I could, and then pay off as much of the loan as possible with the money I had when the first payment came due. For the rest of the loan total remaining after that, I would take out a no-interest loan from my mother (to be paid back at $500 a month) to cover the rest of the loan total in order to minimize interest owed on the money.
Avoid New Debt if Possible
Part of my plan also involved staying debt free. While this may be easier said than done as a new graduate, it can be an integral part of paying off student loans in a timely manner.
I avoided items like a new television, fancy new furniture, or stereo system, and other high-priced furnishings, sticking instead to items I already had and a few hand-me-downs from my mother as she downsized in preparation to relocate.
Think Outside the Box
Sometimes it takes a little thinking outside the box in order to create the best payoff situation for your student loans. Personally, my thinking outside the box included avoiding falling into the “payment trap”.
Some people just stick to the minimum payment owed because that’s the payment structure of the bill that is sent to them. However, sticking to this structure can increase the amount of interest you must pay over time.
I preferred to apply as much money as I could and felt comfortable with to the loan. This way I could pay off as much of my student loans as possible, as quickly as possible, thereby reducing significantly the amount of interest I paid as compared to what I would have paid at over a 6% rate over the course of the loan payoff term.
The author is not a licensed financial professional. This article is for informational purposes only and does not constitute legal or financial advice. Any action taken by the reader due to the information provided in this article is solely at the reader’s discretion.