They say education is the best investment you can make. But darn if it doesn’t get expensive.
Primary and secondary school can be had very cheaply if the country you live in provides free basic education, but higher learning is notoriously costly. Unless you get a full scholarship, getting a college education in countries like Australia can easily cost you over PHP1,000,000 a year.
Yet since a college diploma from a top-rated university can open a lot of doors, a lot of people end up neck-deep in student debt in the process of getting one. Thus, even if they do get that dream job in a prestigious company, they are likely to spend a good deal of their post-university lives paying it off.
Since we would all want to get rid of our student loans ASAP (so we can all get on with achieving our #lifegoals), how do we go about it?
1. Compute precisely when you’ll be free of your student debt
First things first, do you even know exactly how much your student loan is? If you do, you can compute how long it’ll take you to pay it off based on your monthly payments (and if you don’t, do get cracking). Once you’ve got an estimated date, you can work on moving it up.
Chances are, it’ll take almost a decade to pay off the average student loan if you’ve been paying just the minimum each month, which brings up to step 2.
2. Put more money towards your student loan
Focus on reducing the principal amount rather than just making minimum payments. (Provided that you’ve got your payment scheme set up, all extra payments should go towards the principal.)
You don’t have to make a big increase in your payments right away. An extra AU$20 each month is already something and if you reconfigure your automatic monthly payments to include such, it makes it harder for you to waste it on something frivolous.
After steps 3 and 4, you can move on to gradually increasing your extra payments.
3. Cut down on expenses
Make a list of all your monthly expenses and examine it. You’ll probably spot quite a few areas where you could downsize your lifestyle so you can put the savings towards your student loan.
Would it be cheaper for you to live with your parents rather than renting out that 1-bedroom apartment in the city centre? Can you cancel your cable subscription and just use free online streaming services to watch your favorite show instead? How about making your own lunch so you don’t have to eat out every day? Are you really making use of that costly gym membership? And, gasp! Do you really need that venti-sized Caramel Macchiato with extra syrup and soy milk every morning?
If you’ve already got a steady job, you’re probably entitled to periodic raises and tax refunds. Rather than spending them on gadgets or any other doodad that you’ve been eyeing, squirrel them away as extra payments on your student loan instead.
Being able to pinch pennies whenever possible is admirable, of course, but you’ll level up your finances more if you combine this with the following step.
4. Increase your cash flow
If you’re still in college, you can hit the ground running on your student loan payments while taking up part-time jobs between courses. (It should go without saying that the money you earn from these gigs should go straight to your student loan payments, however.)
Otherwise, extend your working hours beyond the usual forty hours a week. Download apps that can link you up with odd jobs like part-time bartending or babysitting. If you’ve got artistic skills like graphic design or photoshop, you can make a few extra bucks by freelancing your services.
You can also try looking around for focus group discussions hosted by companies looking for customer input on their products or services. These things can pay anywhere between AUD130- AUD330 for a mere two hours of your time.
Many private lenders now offer different student loan refinancing schemes. These allow you to pay off your loan at a lower interest rate, giving you lower interest payments.
In addition to this, you can also select a new term length when you refinance. These range from five to twenty years, but the shorter your new term is, the lower the interest will be on your new financing. Win-win.
6. Instead of birthday or Christmas gifts, make it known among your loved ones that you would prefer assistance with your student loan instead
You can post a carefully-worded announcement on Facebook about how you would appreciate cash gifts for paying down your debt once your birthday and/or the Yuletide holidays are around the corner. Don’t forget to mention that any amount will be greatly appreciated.
7. Do volunteer work in exchange for loan forgiveness or cancellation
Volunteerism isn’t just good for the soul, it’s great for your wallet too.
Organizations like Peace Corps offer programs where volunteers can become eligible for partial cancellation or debt forgiveness depending on what kind of loan they have and what they intend to do after rendering voluntary service. Check it out here, and you just may find a whole new purpose in addition to debt assistance.
As you can see, there really is no magic formula to all of this. As with anything involving your finances, you need discipline, focus, and of course, good old penny-pinching to get rid of your student loans in good time. Chalk it up as one more valuable lesson to be learned outside the classroom, eh?