Why should you pay off your student debt fast?
Who doesn’t want to pay off their debt fast? But I understand that we don’t really want to waste our money on paying it off. We want to be able to enjoy our lives and do what we love. This strategy will allow you to focus in for a limited time and pay off your student debt fast once and for all. Here is why you should implement this strategy.
You will end up paying a lot less
After you finish college you end up with a monthly payment on your student loans. There is a re-payment plan, for example, you would pay off your debt in 10 years with a certain % of interest.
It might seem convenient to just hop on to a payment plan and just pay that low payment for the next 10 years. Do you know how much more you will be paying? Let’s calculate it and see…
You graduate college with a student debt of 60k and you sign up for a payment plan. 10 years from now you should be debt free.
Assuming that the interest rate of 5% is fixed for the entire 10-year repayment period, you can use a loan calculator to determine the total amount of interest you would pay on a $60,000 student loan.
Using a simple online loan calculator, the total amount of interest paid on a $60,000 student loan with a 5% interest rate over 10 years would be approximately $18,252. This means that the total amount you would have to pay back over the 10-year period would be approximately $78,252 ($60,000 principal + $18,252 interest).
Now, I don’t know about you but an extra 20k over top of my actual amount is pretty significant!
You won’t have to face any fees or penalties
Another option you don’t want to take is to completely ignore your debt and not pay it off. It will not just evaporate and go away after a certain amount of years.
If you don’t pay off your student loans, you could face a number of negative consequences. Here are some of the potential outcomes:
Late Fees and Penalties
If you miss a payment or are late with a payment, you may be charged a late fee or penalty. These fees can add up quickly, making it harder to pay off your loan
Damage to Your Credit Score
If you consistently miss payments, your credit score will be negatively affected. This can make it harder for you to obtain credit in the future, such as a mortgage or car loan.
Wage Garnishment
If you default on your student loans, the government may garnish your wages. This means that a portion of your paycheck will be withheld and sent to the lender to pay off your debt.
Loss of Eligibility for Financial Aid
If you default on your student loans, you may become ineligible for future financial aid. This can make it difficult to return to school or continue your education.
Legal Action
In extreme cases, the lender may take legal action against you to collect the debt. This could result in a court judgment against you, wage garnishment, or even the seizure of your assets.
Strategy to pay off your student debt fast
I like to call this strategy the All-in debt end strategy. You will be fully committed to pay off your student debt fast.
Become frugal
If you want to plan anything you need to know what your dealing with. Creating a budget gives you just that. You are gaining knowledge of where your money is going.
Figure out what are your necessary expenses and then try to cut down on all the rest of your expenses.
We tend to waste a lot of money on things we don’t really need or even use. For example, gym memberships at a gym we don’t go to anymore, a subscription like Netflix that you forgot about but still pay for, or eating out every other day.
After creating a budget and getting in control of what you spend your money on, trust me, you will be able to leave a chunk out to pay off your student debt fast.
I was able to find multiple areas in which I was wasting my money on things I wasn’t using or gaining any benefit from.
I created a shopping budget which lowered my weekly grocery bill by a whole lot it was crazy. Also, I found that I was paying for a soccer streaming subscription that I wasn’t even using anymore.
Add any extra money
When it comes to paying off your student debt fast, you need to be committed by putting any extra income you get towards paying off that debt.
If you get money back from filing your taxes at the end of the year, you should put towards your debt.
It might be hard to do, but think about it as a one-time pain for a lifetime relief. The mindset is always key here.
If you have a 401k, consider taking some of it out to pay for your loan. I had left my job and got a new job and the previous job called me and told me that I had a 401k balance that I needed to deal with. The options were to either take it out or transfer it over to my new jobs account. I chose to take it out and it served me well in paying off my debt faster.
Also, if you have a side hustle that earns you some extra money, you should consider using it to pay off your debt.
I was driving DoorDash when I had spare time and I was able to use all the income to take a huge chunk out of my student debt.
You never know what could show up suddenly and you end up with a good amount of money.
I always feel like when you are committed and focused on getting a certain thing done, good things happen and help will find your way. All it takes is to be dedicated.
Calculate when you will be debt free
When will you celebrate your Independence Day after fighting off your student debt?
Make a realistic goal date on which you will be completely cured of your debt. I was able to pay my student debt off in the length of one year and 3 months. My goal was a year and half.
Using what you did previously with your frugality, you have an idea of what you can afford to pay. I prefer you make a weekly payment and if you can’t try a bi-weekly payment.
Let’s say you have a 60k loan and you calculated your budget and were able to pay $400 a week.
Based on how much you are able to pay this when you will finish paying off that 60k debt. About 3 years, but that is if you just pay it off with the payments you make. You also have the extra income money that you can add to it that will take off a lot of time and make it even earlier.
I had half my loan paid off with extra income payments which really cut down on how long it took. Now I am enjoying a debt free life, and I want you to be able to feel that same!
Here another post you might find interesting, use a credit card and make money
So long…