The information below is just an excerpt from the Debt Survival Guide. For more tips and useful information, download the full guide!
It’s no secret that college is expensive, and many students graduate with debt. In fact, the average student loan balance in the United States is currently $26,000, and more than 2/3 of students have some outstanding student debt. Below are some tips to help you eliminate this debt so you can achieve short-term and long-term financial goals.
1. Know What You Owe.
Before you can begin to eliminate your debts, you must make an effort to understand them. Be sure to learn the balances of all of your loans, as well as how much interest you will pay on each loan. It is also important to distinguish between your federal student loans and private student loans. Although you may be able to reduce both types of debt, the rules for each type are different.
2. Sign up for Automatic Payments.
When you are trying to pay off your debts and reduce your overall costs, missing required payments can put you behind quickly. Each time you miss a payment, you will incur a late fee. If you miss payments on credit cards, you may also be subject to a higher penalty interest rate in the future. Furthermore, any payments that are more than 30 days late can affect your credit score, making it more difficult for you to access credit an affordable interest rate in the future.
Make sure that all of your payments are on time by signing up for automatic payments with all of your loan companies and creditors. Many creditors will offer discounts to borrowers who sign up for automatic payment via ACH transfer, so take advantage of these offers if possible to decrease your costs even more.
3. Pay Off Credit Cards.
Because of the high cost of attending college, many students turn to credit cards to cover their expenses. According to NASDAQ, the average credit card debt among students at four-year private colleges in 2013 was $737.
Credit cards tend to carry high interest rates, and the total debt can increase quickly. For this reason, it is best to pay off credit card balances before paying off your student loans. To pay off your debt quickly, try to make more than the minimum payment each month until the balance reaches zero. If you owe a balance on more than one credit card, pay off the smallest balance first so that you will have more room in your budget to make extra payments on your other outstanding debts.
4. Strive for Total Debt Elimination
With student loan and/or credit card debt hanging over your head, building a savings and reaching your other financial goals can be extremely difficult. However, by budgeting carefully and using these strategies, you can eliminate your debts and get your finances back on track. If you feel discouraged at any point during this process, just think about the big picture to keep yourself motivated.
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