03 May FAQ: Paying Off Student Loans
Student loans are often the only way a young adult can afford to obtain a college degree. I personally had student loans after attending graduate school to get my MBA. Yes, I was a little scared when I graduated about how I would be able to pay them off. I really did not like the idea of being in debt. Is it possible that you currently have student loans and feel the same way?
I was recently asked about my thoughts on this particular topic. Since many young adults will be graduating from college this month, let me answer a few of the most common questions I get based on what I have learned over the years.
What tips would you give a recent college graduate with student loans?
- Please do not feel ashamed of having student loans! Having school debt is not a punishment and is not something to spend valuable time dwelling on or worrying about.
- I personally can attest to you that an education was the best investment that I ever made in my career.
- Did money fall out of the sky to pay off my loans? No. However, I embraced the fact that I was an adult and I took responsibility for paying back what I owed.
What strategies work in quickening the process of paying off student loans?
- The best way to pay off student loans is systematically, every single month.
- If you are disciplined and focused, little by little, you will pay off your loans and eventually be debt free. You will also have the gift of an education, which is an asset no one can ever take away from you.
- I recommend paying as much as you can afford to pay, above and beyond the minimum required payment, every single month.
- You will temporarily have to live well below your means, but the long-term benefit of being debt free is well worth the short-term sacrifice.
Here is a real life example:
If your monthly minimum required student loan payment is $300 per month, budget anywhere from $50 to $200 per month extra that can be allocated towards reducing your student loan debt. This strategy will allow you to pay down the principal of your student loan much faster. Having a proactive plan to pay off your debt will shave years off of the time you have to make monthly payments.
- Automate your payment so it comes out of your checking account before the monthly payment is due. You never want to be late when making your student loan payments. This will strengthen your credit score, which is very important when starting out as a young adult. A high credit score will help you purchase a home when you reach the point in life where you are ready to put down some roots.
- If you are not sure how much you can afford to allocate each month to reducing the monthly principal of your student loans, take some time to create a detailed monthly budget.
- In order to eliminate any possible objections to this strategy, I have taken the hard part out of creating a budget. If you go to emilygstroud.com and enter your email address, I will be happy to send you an electronic version of a detailed monthly budget worksheet. All you have to do is fill in the blanks on the worksheet and add and subtract. There are no excuses now!
- Once you have a realistic budget, decide how much extra income you can allocate toward paying down your overall student loan balance each month. Then put a plan in place.
- Do not think of the extra income you are allocating to paying off your debt as negotiable or optional.
- If you stick to your financial plan, you will be out of debt as quickly as possible!
- Most importantly…to the class of 2016 at Texas A&M, Gig’Em Aggies!
Give to everyone what you owe them: If you owe taxes, pay taxes; if revenue, then revenue; if respect, then respect; if honor, then honor.
Romans 13:7 (NIV)