As a new graduate, one of the best things that you can do is learn how to manage your finances well. But, if you’re like most recent graduates, then you are unaware of how your student loan debt can affect your finances in the long term. Hint – the effect is severely detrimental.
Current studies show that unpaid student loan debt is the prime way to reduce your lifetime wealth.
With the average student loan debt being $50,000 for a four-year institution and with this high monetary figure only growing, it isn’t uncommon for this type of debt to remain outstanding for a long period of time. Loan debt that remains outstanding tends to accumulate interest at a rapid rate, leaving you owing more.
Rather than put yourself in a position where you lose money, it is time to become more proactive and pay off your outstanding loans. While it may seem like a challenge, there are a number of steps that you can take to reach your goals quickly.
By paying off your debt quickly, you then use your earnings to invest in things you really want to invest in.
Get a Job that Pays
You can try any method you want to pay off your student loan debt, but if you don’t have a job, then most of your efforts are going to be futile. As a result, your goal upon graduation should be to land a job that corresponds to the value of your college degree.
To do this, many employment sites recommend becoming as marketable as possible. For instance, according to Forbes, to become more marketable you should join LinkedIn and also try to secure an internship as early as possible at the end of your college career. Internships, if you perform well during their duration, will usually lead to employment opportunities.
As a result, rather than worrying about finding a job before your loan grace period ends once you finish college, you can start working immediately to pay off your private student loan debt. At the end of the day, you’ll notice that you’ll be much less stressful.
In addition, if you do not find a job right after graduation, it is very helpful to know that most loan grace periods run about six months. However, it is always best to double check with your private loan lender since the number can vary.
Sign-Up for the Auto-Pay Option
Another great move to help you repay your $50,000 debt is to make sure that you don’t avoid making loan payments. Many people, despite having the job and the funds to make loan payments, usually skirt away from their obligations because they simply convince themselves that making loan payments are not necessary.
To the contrary, making your loan payments is completely necessary. When you take out a private loan for your education, your lender most likely has a perfected security interest in the loan. This means that the loan you take out is secured by some form of collateral.
This guarantees that the lender will have some form of recouping its loss in the case that you default or fail to pay. Therefore, if you fail to pay your loan, your lender can go after your assets in order to make up for your lack of payments.
To prevent the issue of not paying on your loans, the best thing is to sign up for automatic payments on your loans. Many lenders allow the funds to simply reduce from your bank account balance automatically so that you don’t need to be concerned about forgetting or failing to pay.
Consolidate Your Loans
Another solution to help you scale back your hefty loan debt is to consolidate your loan. Loan consolidation not only helps you pay your loan back more effectively, but it also allows you to manage your debt much more easily. Loan consolidation is the process of taking out a large loan to repay all of your outstanding student loans.
With that, the only loan you will be left with is the one master loan to pay back. With loan consolidation, you can also work on negotiating a lower interest rate with your lender. To attain a lower interest rate, it is recommended that you also have a relatively moderate to high credit score.
In addition to lowering your interest rate, consolidated loans become fixed rate loans. The fixed rate loans allow you to better predict your loan payments every month and you can also be certain that the interest rate is going to stay the same for the duration of the loan.
Track Your Spending
It takes a lot of effort to reach a good state of financial health. For example, if you want better financial health and an ability to repay your student loan debt quickly, then you should also consider becoming very serious about tracking your spending.
When you track your spending, you can view exactly where your money is going and determine if any of those money drains are not worth it. You’ll quickly find yourself scaling back on luxuries like cable or dinners out because you’ll realize that giving up these luxuries for a short period of time is going to enable you to pay off your student loan debt quickly.
There are many ways that you can learn how to track your finances. For example, some people will use mobile applications or computer programs, while others will employ a good ‘ole notebook. Either way, you’ll be able to cut down your debt with this method.
Overall, paying down your student loan debt that is at or exceeds a balance of $50,000 takes more than just desire, it also takes time, dedication, and a proactive effort to reach your goals. By tracking your spending, consolidating your loans, signing up for auto-payments, and finding that job that is going to help you pay off your loan, you’ll be well on your way to success.