Most young adults and fresh graduates are being held back from attaining their life goals because of their student loan debts. Real life goals like buying a home and settling for marriage, starting and owning a business, and saving for retirement has been overly affected by the huge student loan they have to repay once they have graduated. Moreover, the student loan debt can increase even more as they enter their early 30s, since they add a mortgage loan to the debt and credit card debts.
It is no doubt that the student loans debt can take you into a grand scheme of things and thus you should prioritize in tackling it early enough. There are various options to conquer a student loan debt and you only require simple steps to get started. Here are 5 steps you should consider if you want to conquer your student loan debt and have control of it in order to achieve your lifetime goals stress-free.
Know How Big Your Loan Debt is and the Available Options
You won’t achieve your goals without having any idea of how much your loan debt is. You have to start by gathering your statements, where to make payments, when it needs to be repaid, at what interest rate, and how much is outstanding. By getting an understanding of these, you will take ownership of your student loan debt.
If you have a federal student loan debt, you have options like graduate, extended, and standard options of repaying your debt. Equally, there are income-driven repayment plans that can significantly reduce monthly payments. However, these options will open up your cash flow but stretch your period of paying the loan implying that eventually, you will end up paying more interest.
Alternatively, you can opt to refinance or consolidate your student loan debt in order to get a lower interest rate. Paying a reduced amount of interest will enable you to fund other investment goals sooner. But as interest rates increase gradually, borrowers under variable interest rate loans will experience increasing rates as well. Thus, if you wish to refinance or consolidate your loan debt, be sure to shop for the best rates and terms.
Do the Long-Term Math
To conquer your student loan debt you have to have a long-term calculation. For instance, reducing your monthly payments is a strategic way to avoid stains on your creditworthiness and stay afloat. However, you must be aware that the less you pay now the more you pay later. If your employer offers a retirement strategy, you should contribute more money in order to get an adequate match. Then you can pay off your student loan debts starting with the highest interest rates like private student loans as soon as possible.
Sign Up for an Auto-debit To Reduce Your Interest Rate
One easy way to conquer your student loan debt is by signing up for auto-debit in case you don't want to take up a consolidation strategy. Most lenders provide a small reduction in your interest rate once you sign this plan. Though it might look like it is not enough, every bit of it helps in the long-run. Besides, you will be less likely to incur expensive late charges or missed payments. Ensure you have enough cash in your checking account to avoid dealing with overdraft charges.
Take Action If You Are Struggling
If you are experiencing a rough time in meeting your monthly minimum payments, do not ignore. Snubbing your student loan debt may result in bushed credit, federal tax returns and even start dealing with lawsuits and collection agencies. Besides, if you default your student loan debt, you are likely to lose more borrower benefits for good. If yours is a private student loan debt, it is important to call the lender and look for possible ways to work out a payment strategy.
Develop A Good Financial Plan
It is important to come up with a good financial plan regarding what you need to pay on your student loans and what to set aside for the other goals you have to achieve. Notably, a student loan debt should never hinder you from achieving your life goals. Just have the right plan with you.