The average yearly cost of university and college education has increased gradually and appreciably over the last twenty years. As a result, student loans in the US have soared to a jaw-dropping $1.47 trillion. These loans are spread over 45 million individuals, according to the statistics from the New York Federal Reserve published at the end of the first financial quarter of 2017.
Student loans are the second largest debt in the US, just behind mortgage debt; however, they are significantly higher than other consumer debts such as credit card debt and auto loans.
The harrowing and unsurprising truth is that a majority of borrowers tend to encounter serious difficulties repaying their student loans. An alarming 12% of student debt is over 90 days in delinquency or default. But we can reverse this troubling trend by enforcing a strict and clear financial strategy that can help worried college graduates get out their student loans sooner.
We have compiled a list of 8 efficient and valuable student loan budgeting tips that can immensely assist you in making your loan repayments. You don’t have to relinquish your comfortable lifestyle.
1. Get Angry
Yes, you read that right! You need to get mad at the amount of loans you have racked up in college. The anger will infuriate you to deal with them as soon as you graduate college.
Once you reach just the right level of indignation, you will be hell-bent on repaying your loans at the earliest. We have seen people who have juggled two jobs, availed and benefited from federal debt programs for loan forgiveness. Some people gave up their extravagant lifestyles only for knocking out these nuisances.
2. Take Benefit of the Grace Period
In case of most student loans, lenders usually offer a grace period after your graduation (or when you stop attending college, if you are not so lucky). During this period you do not have to make repayments on your student loan.
However, we suggest you avoid this temptation of ignoring or forgetting your loan during the grace period. In case you have the benefit of a grace period, this is just the right time to completely understand your student loan, devise a sound game plan, and start making repayments like you would after the expiration of your grace period.
3. Adhere to Our 20-30-50 Plan
This 20-30-50 plan is an extremely flexible and fun way of accounting your financial spending. The first step is to allot 20% of the take-home pay toward your financial improvement.
In your case, direct the 20% toward repaying your monthly student loans. The next step is to devote 30% toward fun or recreational activities, like a night out with your best pals. Spend the remaining 50% on your essential needs, like gas bills and rent. You won’t go wrong with this plan.
4. First Pay Yourself
Irrespective of the type of student loan you are carrying, you are definitely shortchanging yourself, if you do not pay yourself first.
If your source of income is reliable and decent, you will have a reasonable sum of money coming in; you will not have much trouble putting down about 10% toward savings and 10% toward debts. If you manage to keep up, you will increase your loan payments when extra funds come in.
5. Closely Track Your Spending
It is easy to splurge hundreds of dollars on branded apparel and fine dining when you are not keeping track of your finances. It is important to track each and every expense, even the ones that are paid in cash.
Nowadays you can benefit from several online auto save and banking features that automatically deduct funds on a monthly basis to help maximize your savings. Try to repay your student debt first, but also save monthly or quarterly toward a future financial goal, like down payments on a house, retirement fund or even a rainy day fund.
6. Say No to Additional Debts
Another common and unsettling trend is that individuals who owe hefty amounts in student loans compound their problems by taking on more consumer debt (for a condo, new car or credit card).
We suggest you focus aggressively on repaying the loans you have already piled up, before you even think of borrowing more. People who drown in debt at a young age severely restrict the opportunities and risks they can take with their careers and, therefore, limit their potential for high-paying careers.
7. Avoid Bank Fees
A recent study from Consumer Financial Protection Bureau indicates that Americans paid a whopping $15 billion in fees on overdrafts and bounced checks in 2016!
Your first step should be to get a tight hold of your finances. There are various personal finance apps and services that are easily available that assist you in keeping track of your monthly expenses, income and savings.
Being aware of your monthly financial position is very helpful if you want to start putting money toward your student debt repayment. As a student you must also ensure you open bank accounts that provide fee-free fund transfers and other transactions and avail credit card facilities with the lowest APRs.
8. Earn More Bucks
Although it is easier said than done, it is one of the best ways of putting a serious dent in your student debt. Here are a few simple ways of making more money:
- If you are an employee, ask for an increment or negotiate a higher salary or even a promotion. But figure out if you can shoulder more responsibilities to earn more.
- Dispose off your unwanted or unnecessary belongings online, or at a consignment shop, or maybe at a yard sale.
- Make use of opportunities for extra shifts or overtime whenever possible.
- Apply for a job with a higher pay scale.
- If you are interested, you may commence your own business. There is nothing wrong with taking a few calculated risks.
- Apply for a temporary or part-time job, preferably, in your neighborhood so that it does not become a big hassle later on. You can start driving for Lyft or Uber, try babysitting or dog walking.