Student loans may have been a necessary aspect of your college experience. However, now that you have completed college, you may be burdened by heavy student loan debt. Some people owe tens or hundreds of thousands of dollars in student loans, and it may take them several decades to fully pay back the money borrowed. Such a significant amount of debt can weigh on your lifestyle and can be challenging to pay down. If you are looking for a better strategy for dealing with this debt, consider these steps.
Scale Back Your Lifestyle
In order to pay back your debt more quickly, you will need to make larger payments on a regular basis. A smart idea is to scale back your lifestyle for a few months or years to accomplish this goal. For example, you may delay buying a new home so that you can enjoy lower monthly housing payments. You may continue to drive an older car until your student loans are paid off. You may have to switch to more affordable housing and cars to save money. Cutting back on cable and other extras can also free up more money to use toward student loan payments.
Consolidate Your Debt
Another great idea is to consolidate your debts. Many people have multiple loans they are responsible for. When you consolidate debts, you may qualify for a lower overall payment. You may also be able to set up a more attractive loan term and to enjoy lower overall payments. While these payments may be lower, the lower interest rate may mean that more of each payment is being applied toward debt reduction rather than to interest.
Use Windfalls to Make Large Payments
If you are like most people, there are instances when you receive large windfalls. This may be a tax refund, a holiday bonus from work, a birthday gift and more. Get into the habit of applying most or all of these windfalls to debt reduction. This is a great way to make a major impact on your overall debt balance.
For many people, total student loan debt may create hundreds of dollars or more in loan payments each month. The ability to pay this debt off can free up a drastic amount of money each month, and this money can improve your lifestyle in great ways. You can more easily reduce and eliminate student loan debt by following these tips.
David Milberg is a financial analyst from New York City.