Paying Off Student Debt
Written by Bethany Williams, Senior Associate Director
Congratulations, you did it! You are now a college graduate with your first “real” job and ready to tackle whatever life throws at you. Then 6 months later after your grace period ends, you must begin making payments on your student loans. Ugh.
My family and I finished paying off our student loans and I want to share with you four steps that I wish I had known when I was a recent graduate.
- Set a goal of when you will pay off all your student debt.
To set this goal, you first must know exactly how much debt you have. I highly recommend you write down all your loans and the grand total you currently owe. Hold onto this number as motivation. I took my grand total and placed it as a visual reminder on the side of my fridge. Also, recognize you may be able to shorten the goal based on pay increases, new jobs, etc.
- Use the snowball method.
The snowball method is where you pay the minimum balance on all your loans and then you take the loan with the lowest balance and pay whatever extra money you can into that loan until it is paid off. Once that loan is paid off, you take the minimum balance and extra payment you were making and apply it into the next lowest loan. For example, let’s say you can only pay $50 extra a month into the loan. $50 extra over the course of 12 months is $600! Do not underestimate what even a little extra payment will do. Over time you will gain more traction and begin to apply more money towards killing that debt!
- Consider refinancing
When I first started paying off debt, I was against this idea because I had heard negative things. However, I did my own research and ended up hearing about Credible where I could input the total amount I still owed, and my income, and the website would give me recommendations for lenders with their interest rates. By choosing to refinance my private loans, my interest rate dropped 8%, and was able to pay off the loans faster! Choosing to refinance was one of the best choices we made on our debt-free journey.
- Re-evaluate your budget.
Anytime you receive a pay increase, a bonus or more cash flow, re-evaluate your budget to see if you can pay more towards your loans. I highly encourage you to evaluate what areas you can cut back in your budget. Some areas to consider are anything that would be considered extra outside of the necessities. (I.e., Eating out, entertainment, subscriptions, shopping, etc.). Also, life will happen. I remember we were about to pay more on our loans and then had to buy a new washer so you will have to account for those things too. A great reason to build your savings account (for the unexpected!) Re-evaluation is important as your priorities will change over time, and it helps us to be good stewards of the financial means God has given us.
- Keep at it.
I cannot tell you how often I personally felt frustrated about paying off loans and feeling that I was not getting anywhere. However, my husband and I followed the steps above and were consistent. We continually re-evaluated to see how we could apply more money to paying off our student debt. Eventually, over what felt like a long journey, we paid our last student loan payment!
I hope your debt-free journey is even faster than mine so that you will have more financial means to give towards God’s kingdom, invest, and help others!
