For every one second, student debt increases by about $2,858.
It’s no wonder that the total U.S. student debt is now over $1.4 trillion in the United States, with an average debt of about $38,000. The student debt issue has hit crisis levels, and individuals need a strategy for dealing with this kind of debt before they fall behind without a chance to recover.
But handling student debt can be more complicated than promising yourself that you’ll put more away. Here are some realistic ways you can handle student debt, pay it off early, and incorporate an ambitious payment plan in your post-collegiate life to make your life easier.
Realize how important your student debt is
It’s understandable that so many former students — saddled with tens of thousands of dollars of student loan debt — want to move on with their lives. They want to buy a home, invest for retirement, and begin looking at stock. Relative to these other potential investments, many people believe that there are better investments available than paying off pre-existing debts.
Nevertheless, eliminating your student loan debt can be among the best investment decisions you ever make.
What you have to do is calculate the expected returns of most investments. For example, a student loan with a 6.8 percent interest rate means that if you pay extra money toward that loan, you’ll realize long-term savings on that interest that’s both strong and guaranteed. That means any extra money you put toward your student loans then becomes among the best sure investments you can ever make.
Ask most investors if they would take a 6.8 percent guaranteed rate of return and they’ll likely ask you where to sign up. Reframe your student loans as an investment of this caliber, and you’ll realize the importance of paying them off early.
Tips for paying off student debt
Once you know how important it is to pay off student debt, it’s time to think about the practicalities of making student debt disappear. Here are a few tips:
Advice for handling the challenges of post-college life
After college, you have a lot thrown at you. You’re not only entering the real world of personal finance, but also doing it saddled with student loan debt.
But being “saddled” with something doesn’t have to mean that you allow yourself to be ruled by it. Instead, take a proactive approach. Decide that you’re going to attack your student loan debt with purpose and find simple ways to increase your cast.
From finding extra money from part-time work or redeeming your savings from cash back credit cards, you can always find more wiggle room in the budget to put money toward your student loan debt. And if you make this process automatic, you’ll notice it even less. That means you’ll have less money to spend now, but it will save you money on interest payments in the future. And when you finally do arrive at that time when student loans are no longer on your budget, you’ll feel the income boost immediately.
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