When you graduate from your school with a five or six-digit student debt, the day you finish paying it back will be one of the happiest moments in your entire life. It seems funny when you think about it. You are going to spend so many years of your life and get into debt to get one piece of paper – your diploma.
And then, you will have to work really hard for the next couple of years to get another piece of paper saying that you have paid back all of your student loans. So anyone who has student loans or debt of any kind has to get seriously prepared to take the path of paying back.
How to Pay Back Student Loans Faster
The first thing to say is to face it head-on. A lot of times we tend to push away or ignore the things that scare us. And let’s be honest, student loans are one of them when you are taking them out. Being young and unafraid, you might think of them as monopoly money. And it seems like something you need to do to get to your dream of becoming someone. Even at graduation, the gravity of it will not hit you. And you will not put much thought into taking out a huge sum. But it hits you in the most peaceful moment of your existence when you receive this letter in the mail about your student loan.
And this moment of realization is scary. Yet, it is the moment that brings a lot of changes into your life. At this point, you need to learn as much as you possibly can about student loans (if you had not done that already) and understand that you are going to be in charge of your student loan and run it. It is kind of a defining moment for every graduate student. If you had not had that check, you would still be just blindly making minimum payments each month for who knows how long.
So that is the first tip is just to face it. It might be frightening and difficult and it is much easier to just kind of ignore and do the bare minimum for your student loan. But facing it is going to be the one thing that you should do. And it will allow you to pay back the loan much faster as soon as you are ready to face it.
The second thing that you should do is to list out all of your loans. You can use the simple Excel sheet and just list out the amount of each loan, the interest rate, and the type of loan it is. This will allow you to just get a clear bird’s-eye view of what exactly is going on with your loans. So if you need to, you will be able to quickly refer to that Excel sheet to figure out the average interest rate across all of your loans or which loan has the highest interest rate or which loan has the largest amount. It is a really good exercise if anything to just figure out what is going on with them.
The third thing is that you have to set goals. This applies to anything in personal finance but especially when it comes to debt or loan payback. If you are just aimlessly chipping away your student loans with no goal in mind, it is going to take you a long time. Paying back all of your student loans in a shorter period will not be just a coincidence. It should be a goal that you need to map out from the beginning.
And as long as you stay on track with that goal, you will be able to pay off all of your loans quickly. It can be motivating to kind of be able to envision that finish line and see yourself up at a certain mark being debt-free. Of course, it is better to break that into many goals of how much you have to pay back each month to stay on track and meet that long-term goal.
Step three is important because to set a long-term goal, it requires you to take a look at your current financial picture and figure out how much monthly income you have and what your expenses are. This way, you can accurately determine how much you can put towards paying back your student loans each month at least. The whole process of setting a long-term goal and then breaking that down into monthly goals kind of gamifies the process and makes it fun.
The fourth thing you need to do to pay back your student loans is to resist lifestyle inflation. Lifestyle inflation is basically increasing your spending as your income increases. When you go from working minimum-wage jobs before you graduate to suddenly making six figures as a corporate worker, it will be a huge jump in income. And it will be so easy for you to fall into the trap of lifestyle inflation, treating yourself with nicer things, taking ubers to work, and eating out at lunch instead of packing your lunch.
It is a dangerous part of a new lifestyle and it is very hard to come back down to this place where you are packing your lunch every day. It does not mean that you will have to put all your fancy stuff on sale. But while you are still a student, it is better to maintain a mindset that you are broke. Looking for affordable alternatives, you can actually figure out that not all cheap things are of bad quality.
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So if you can stick with that broke student mentality, you are going to be able to pay off your loan so much quicker. Always keep the goal in mind that is a piece of paper that is going to tell you that you are debt-free. These four steps apply to everyone regardless of your income level or the repayment plan that you are on. The basics of student loans come down to this – if you want to pay off more student loans, you either need to make more money or save more money.