The Best Ways to Avoid Building up an Overwhelming Student Loan Debt

Many graduates today, acquire their degrees alongside high-debt burden from unsettled student loans which can be tens of thousands of pounds. However, with a strategic approach, consistency and commitment, you can pay off your student loans faster, lower your monthly payments or avoid surplus borrowing in the first place. Below are definite ways to avoid a huge student debt profile.

Look for varsities that help you rely less on loans

Besides excellent teaching, research facilities and reputation, one critical factor that you should consider when looking for admission at colleges is the load of student debt encouraged- choosing one that does not overload their students with debts.

One way to do this is to check the statistics. Avoid schools with high default rates, which forces students to take up debts that they can’t afford. However, note that default rates may be an average stat and may not reflect the personalised financial package of individual colleges.

Make a budget

Having worked out your monthly repayment sum, the next step is to create a budget. Make sure to treat it strictly with the same commitment and discipline that you would treat other monthly bills like rent, utilities and insurance.

Pay off the loan upfront

Always pay off your minimum balance and avoid excessive default or late fee penalties. It’s a good thing that student loans don’t count on credit ratings and so don’t impact a person’s capacity to borrow in the future after graduation. However, lenders factor them in when considering a mortgage application.

Reduce your principal

Some of us might be lucky enough to find that we have some money lying around. Rather than put it towards the repayment of your student loan; pay it as part of your initial debt capital and lower the original amount. Make sure you notify your lender of this approach so that they know how to credit the extra payment.

Reduce your rate

If you have a consistent job with a fair income that is considerably higher than your total monthly repayment rate, you can refinance the high-interest student loan into a lower one and help you to pay off your debt more quickly. Be sure to have an understanding of the personal loan market before perusing this option to ensure you get the best possible deal.

Automate your payments

In addition to the peace of mind that comes with knowing that your debt profile dwindles further at the end of every month, some lenders offer extra incentives for people who want to put their repayment plans on automatic deductions from their bank accounts.

Get a job that pays your loans

You can as well look for a job that offers help in cancelling student loans. Many of the professions that have the highest loans like law, medicine and veterinary also provide students with opportunities to pay off their debts by working certain jobs.

Opportunities also exist in other fields and professions as well, like law enforcement, qualified charity organisations, social work and education. Even if it is not strictly a loan forgiveness plan, some employers offer student workers debt repayment as one of the incentives in their employment package.

 

It’s not what you make, it’s what you spend (seriously)

Screen shot 2009-12-02 at Dec 2, 2009, 8.24.22 PMThe proof is in the pudding suckers… whatever that means. I did some hardcore number crunching over the weekend and realized something: I’m totally stoked on my financial progress over the last 12 months. Sometimes I get so focused on what lies ahead, I forget to take a little walk down memory lane and reflect on where it all started. Let’s take that “walk” now, shall we?

Since I posted about my net worth yesterday, it’s only fitting to start there. I currently have a NW of $27,389. Wanna know what my NW was one year ago? I was rockin’ a solid -$10,000 NW. That means in twelve months I have totally turned my financial situation around, to the tune of almost $40k. There are a few factors that have played crucial roles in this awesome change. 1) A big help in this increase is due to the rise in the stock market over the last year. 2) I got an $11,000 raise. I was making $39K this time last year and now I’m sitting pretty at $50k. In February I will be getting another raise to $62K so I can’t wait for that day to come. 3) Supplemental income. I’m obsessed with making money. I have found tutoring/odd-jobs to be quite lucrative. I think I’ve made about $6,000 this year in side work.

If you’ve been reading PDITF for a while, you know I am quite bi-polar when it comes to my student loan. I started the year paying double payments to Sallie Mae each month (about $330). In April, after advice from my readers, I decided to up the payments to $1,000/month. A few months later I got real crazy and decided to throw between $1,500 to $2,000 at it each month. Then, about a month ago, I decided to go back to just double payments. Although my payment strategy has been all over the place, I’ve made some pretty solid progress. In fact, I have reduced my student loan debt by $11,500 over the last year. I have another plan in my head as far as my student loans go, but I think I’ll save that for a future blog entry 🙂

I totally obliterated my 2009 savings goals. If you cruise to the “My Budget” page you will see on 12/31/08 I had these goals for the ’09 calendar year…

Checking: $1,500
Savings: $11,000
Roth IRA: $8,000
401K: $10,000
Total: $30,500

These are what my accounts currently look like…

Checking: $3,060
Savings:$19,525
Roth IRA: $11,877
401K: $10,772
Total: $45,234

As you can see I exceeded my goals by $15,000. Do you know how awesome it feels to set goals, and not only meet them, but completely destroy them! It makes me one happy ninja.

Over the last year, I have improved my financial situation faaaaar more than I would have ever anticipated. The secret to this change is quite simple, and I’d be happy to share it with you: Spend less than you make. Period. End of story. This financial principle is not open to interpretation or debate. If you live on less than you bring home each month, you will have nothing left to do with your money but pay down debt, save, invest, and give it away. There are absolutely no excuses to live outside of your means (aside from medical emergencies). I am living proof that spending less than you make REALLY WORKS! I’m so glad I don’t have to live the paycheck to paycheck lifestyle. At  24 y.o. I’m totally stoked to see where I am ten years from now. Anyone else have any success stories from living within their means? I would love to hear them to motivate me even more.