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January 11, 2018

The Key to Paying Off Your Student Loans in Five Years or Less

Coming out of college and entering the real world can be a very scary time. Not only do you have to find a job but you also have to find a job that will cover all your expenses for rent, groceries, nights out on the town and most importantly your student loans. Student loans on average take up about 30% of your monthly salary. The companies don’t even really give you too much of a grace period before they are breathing down your necks wanting that first payment. And depending on how much you had to take, your entire paycheck could be equivalent to the amount you have to pay back. Although it all looks doom and gloom, there are many ways to get ahead of your loans and to pay it off before your five-year reunion.

  1. Look at the big picture: Do you have more than one loan? If so, which loan is the smallest? You want to go after this one first and pay it off as quickly as possible. Can you consolidate any of your loans into one loan? Can you get a lower interest rate? Once you see where all the moving parts are it will be easier for you to create an overall goal…
  2. Create a goal and stick to it: Make a goal for each loan you have. This goal must be realistic; you don’t want to bite off more than you can chew. Make a plan that fits your lifestyle and leaves you not eating ramen on a weekly basis. Set a time line of when you want each loan or loan to be paid off by. You want to pay it off in 6 months? Okay how much does that come to on a monthly basis…
  3. Set an amount: Each loan will be given a monthly amount you HAVE to pay. Take this number and round up to an “easy number”. You have to pay $186.73 a month? Make it $200. Have the amount coming out of your bank account in the middle of the month so you aren’t competing against rent, electric, and other bills that come out the first of the month. This way it won’t hurt so bad when a big chunk of change comes out of that second paycheck you get a month. Focus on paying as much as possible on the smaller loans to get them paid off. After you set the monthly payments for your loans think about revisiting those goals…
  4. Reaching Goals: In order to reach more aggressive goals and pay the loans off in five years or less, you will need to pay more than just your monthly contributions. Are you in a profession where you can make extra income? Commissions? Bonuses? If so this is extra money that you don’t plan on getting towards your monthly budget. Don’t even think about this money when it comes in and just automatically put it towards your loans. If you don’t really get any extra income look at other ways to save money. Are some months less expensive than others? Can you cut back on extra expenses? Is a part time job an option? There are countless ways you can cut back your lifestyle to be able to put more towards that ultimate goal.

The key to paying off your loans is to stay on track, make realistic and obtainable goals, stay on budget, and find ways to contribute additional payments. Student loans can be scary and overwhelming at times but with the right mindset you can accomplish your objectives and be ridden of a big financial burden. The key is you.