student loan debt
Student Loan Debt
Paying off student loan debt isn’t exactly the easiest financial responsibility a person will ever take on. The average student loan debt for a graduate of a four-year public school is $20,000. That is a hefty price tag, but when you consider that college grads earn 62 percent more than high school graduates (which translates into $1 million over a lifetime), the debt appears justifiable.
The key to paying off student loan debt is to hit it as hard as you can as soon as you can. The fastest and most effective way to pay off your student loan debt is through a standard repayment plan. Spanning 10 years, the borrower pays off the debt the same way other standard loan payments are. What is attractive about the standard program is the amount of interest you don’t end up paying by paying the loan off in 10 years. To compare: standard repayment on a $20,000 loan (at 6.8 percent interest) yields $7,619.31 in interest charges versus a graduated repayment plan at 8.25 percent interest over 20 years that yields $18,632.15. Do you see the difference? You pay more than double the amount in interest when you extend the life of your student loan an additional 10 years.
Most people already grasp the benefits of paying off student loan debt as quickly as possible. The bigger problem is finding the money to make those heftier monthly payments that come with the standard repayment plan. With careful budgeting and some dedication, you can meet your financial goals.
When building a personal budget, there are several things to consider. First and foremost, people tend to underestimate, so when building the budget keep your eye out for unrealistic figures. Secondly, your budget should reflect percentages of your income. For instance most budgets pay out 35 percent of the income to housing. Items such as car insurance, utilities, clothing, and entertainment are only 5 percent (each) of the budget. By building a budget, and sticking to it, you can view on paper what it is going to take (like spending less money on clothes, or no moving into that fabulous apartment) to get your student loans paid off.
