Student loans are very normal for a typical college student. On average, students accumulate a total of $20,000 debt upon graduation and will face the task and responsibility of paying it off. The downside of having student loans is that graduates don’t always have a good and stable source of income that will give them the capability of paying them off fast and consistently. This will keep them in debt, hence they immediately fall into a financial debt trap early on their their post-student lives.
However, the good news is that paying off debt has much to do with discipline and less of the income or available source of funds. Of course, having money to pay it off is very important but it would be useless without the necessary discipline and better yet, habit to pay it off. Here are some tips on how to pay off college debt fast:
1. Designing a payment plan. The first thing to do in paying of debt is to draw out a plan in paying it. Generally, students have limited income or source of funds upon graduation provided that they find a job. Worse, some students may stay in the unemployment or incomeless zone for a while before having one. For those with limited income, making a budget and prioritizing the debt will work so well. For those who doesn’t have any sources of income, making arrangements with the loan provided will work. Resorting to a new debt to pay off an existing debt will never work as it will never pull one out from the debt zone.
2. Live frugally. Among all advises, when it comes to finances, living frugally tops the list. Living frugally simply means living within or lower than one’s means or simply focusing more on the needs and limiting the wants. Many students struggle to live frugally as they want instant satisfaction by spending a lot of what they earn. Living a frugal lifestyle requires discipline and consistency as it is all about habit. If one lives frugally, he can easily pay off debt because he will have more spare cash. Prioritizing debt is a need hence, since needs are of priority, the debt can easily be settled.
3. Avoiding extending payment periods. Debts have interest rates and the longer the debt stands, the higher the interest would be. Extending payment periods will make the debt grow higher and in the end, the payment will be higher than it should be. For example, a $20,000 debt that grows 0.5 percent a month will be $21,200 after a year, but will be $22,400 after two years. Hence, if the debt isn’t paid off immediately, it will grow. In order to avoid extending payment periods, it is advisable to either pay the exact or minimum amount in time or pay more than the minimum amount in time. The second option is better.
4. Get a job. Getting a job is simply the easiest way to earn an income. Having a job will provide a person a fixed amount of income on a regular basis normally twice in a month or on a monthly basis. Having a fixed amount of income regularly can make one plan out well the payment plans for the loan such as how much amount should be allocated on a bi monthly or monthly basis in order to pay off the loan fast.
5. Set goals and prioritize paying off debt. Goals are the things that a person wants to achieve. Long-term goals are made up of smaller goals which are being achieved first in order to get the big thing. Paying off debt is the first step towards achieving financial security and independence and without debt, one can freely make financial decisions without having something that pulls him back. For a person with a job, paying off debt can be done within a year after graduation. For those with better paying jobs or who have good recurring income, payments can be done in less than a year.