Money Monday: Student Loans

Money Mondays

Student Loans

Student loans suck, plain and simple. There's no nicer way to put it. By the time you've finished your college education, you are stuck with a debt that needs to be repaid starting six months after graduation, regardless of your job situation. On average, the amount of student loan's an individual is burdened with, is enough to have bought a decent sized house. The benefits of an education mostly outweigh the cost of student loans but it is an ugly thing to have hanging over your head as you work to build your post-college career.

First thing you need to do is breathe. You are not alone in the struggle with student debt. Most everyone you meet has either gone through paying it off or is in the process of doing so. I know it seems overwhelming but you will get through it, and the balance will get smaller, I promise you that.

When it comes to paying off your student debt, there are many methods that can be utilized. I haven't tested all of them, but I will tell you what I've heard about, what has worked for friends, and what is working for Vinnie and I. 

Method 1: "Overpaying"

I call this method overpaying, because honestly I'm not creative enough to think of a better name. It entails paying more than what is due on your monthly student loan payments. It doesn't have to be by a dramatic amount either. Just round up to the next ten's place. For example, if my payment was $283.48 every month on my loans, I would try to pay either $290.00 or even $300 if I could swing it that month. 

The extra payment will be applied to the loan's principal balance, which will decrease at a faster rate then if you just pay the minimum. It also decreases the amount of interest that will accumulate because it will have a lower principal balance. Granted, it is only a small amount of interest saved at first, but if you consistently pay more than the minimum, the amount saved will grow over time. A third benefit is that the overpayment acts as a safety net in case there is a major financial emergency and you can't afford to even make your minimum, the extra payments will have hopefully dropped your minimum payment down to a level that you can pay in that month where the financial disaster occurs.

Method 2: "Consolidation"

Neither Vinnie or I have never tried consolidating our loans but we have friends and family members who have and it helped them to lower their monthly payments. I do know that it is time consuming to fill out the forms and not all loans will consolidate since some are Federal and some are private.  You could even consolidate your loans and overpay, paying off the balance even faster. Consolidating also lowers your interest rate in most instances so it is worth the hassle of filling out all the forms. 

Method 3: "Research"

Depending on what your field of work is in, there are many state and Federal programs that "forgive" your student loans after working in that particular field for a certain number of years. Primarily, teachers, doctors working in rural areas, and those working for a not-for-profit are candidates for these programs. Again, it is time consuming to fill out and collect the necessary paperwork to qualify for these forgiveness programs but if you can get your loans forgiven for doing a job you enjoy, it's worth it. Knowing if you qualify early, you can make the minimum payments without worrying about accruing interest since it will be forgiven in the end. 

One last piece of advice that I would offer is to keep track of your student loan balances either through Mint.com, an Excel spreadsheet, or some other method. This way you aren't surprised by the balances and you can track your progress. In addition, if you get a surplus in your savings account you can put it towards your student loan balance with the highest interest rate.

Does anyone have any tips regarding student loans?

Happy Monday!

Jackie and Vinnie

**Remember, we are not certified financial planners. We are simply offering a topic to start a discussion about money with the young adults. Before making any financial decisions, please consult with someone familiar with your financial position.