The Great Escape: Learning How to Face, Battle, and Conquer Your Student Debt
By Nicole Schlichting
Of all the first world problems plaguing American millennials in 2017, college debt is arguably one of the most formidable and frighteningly prevalent. As the cost of higher education steadily rises, so do the heart rates of the young adults in Generations Y and Z — we know that in order to truly be eligible candidates in today’s incredibly competitive business world, we will likely have to commit ourselves to decades of incessant debt.
Though paying off your student loans might seem utterly overwhelming and impossible to accomplish, there are ways to make the process faster, more bearable, and more organized. Take a peek at some of these methods that can help you 1) begin chipping away at your seemingly insurmountable debt and 2) build habits that will keep you in a financial sweet spot once you’ve gotten that debt under control:
Nip it in the Bud:
If your only source of debt is from your education (and you aren’t planning on taking out more loans), the best way to prevent your financial problems from growing out of control is by ensuring that you don’t borrow more money. To give an example, buying big items with money you don’t have and racking up a credit card debt is not a great idea if you’re already trying to pay off other larger, more significant expenses. For some people, this might be an easy step — for others, making a conscious choice to only spend money you physically have could be a difficult lifestyle change. Either way, what is important is that you nip the problem in the bud and focus on managing the debt you already have, not adding to it.
Reconfigure Your Budget:
I’m not sure about you guys, but when I feel frazzled or overwhelmed by something, I find that the best way to calm myself down is by reorganizing my thoughts and making a plan going forward. The same is true with your finances! If you’re in debt, chances are your budget could use a makeover; our advice is to sit down and figure out exactly how much money goes where each month and whether you end up with a surplus or a deficit. If you end up with a surplus, great — that money should go towards paying off your loans, no exceptions.
If you end up with a deficit, this might mean you need to reconfigure your budget in one of two ways: either you can make more money (get a side job, ask for a raise, work more hours, etc.) or you can trim expenses (lose the gym membership / Netflix subscription, eat out less, don’t go shopping, etc.). Need a bit more help organizing your budget? Check this out.
Emergency Piggy Bank:
I know we just talked about ways to save up more money to put towards paying off your debt, but there’s one more important fund to consider: your emergency piggy bank. This is a small savings fund (~$1000) that you build up and set aside for emergencies — I know it sounds completely unreasonable, especially if you’re already in debt and feel like you can’t afford to leave that much money untouched, BUT you will be so thankful for this money if you ever run into an emergency. Why? Because if you are faced with an emergency without it, chances are you will be forced to go into even more debt which is bad bad very bad (^see Method 1).
Make a Debt-Paying Gameplan:
Tennnn-Hut! Now that you’ve gotten the groundwork set up, it’s time to figure out what approach you want to take to paying off your debts. If you only took out one loan and have just a single interest rate to worry about, great — make a habit of putting all your extra monthly cash toward paying off that debt (plus any excess money that falls in your lap — tax refunds, inheritance, birthday money, etc.). Our suggestion is to preemptively set aside a certain percentage of your income each month that you plan on putting towards your debt — that way you don’t get stuck with empty pockets at the end of the month.
If you took out multiple loans, there are a couple different methods you can use to actively pay off your debts; the first is where you start by paying off your smallest debt (regardless of interest rate). Though this will not save you the most money in the long term, it’s a great way to relieve some of the immediate pressure your debt has been placing on you, plus it will help you build momentum for the future. The second method is called laddering and will be your best long term money-saving plan — what you’ll want to do is organize your loans from highest to lowest interest rates and begin paying off the highest first, regardless of the size of the actual debt. Both of these approaches to debt-paying are smart and viable, the key is to pick the one that better suits your personal situation and stick with it.
Paying off your student loans sucks. The fact that 81% of highly educated Millennials are in debt is symptomatic of a much larger societal problem that desperately needs to be remedied (do you feel the Bern?). Until that day comes, unfortunately, the best we can do for you is help you figure out the best way to get out of debt while maintaining your sanity. Check out Grow’s website for financial tips, savings advice, and more!
