By: Jeremy Kates0 comments

Nothing is more daunting than looking at your amortization schedule for your student loans. As you watch the large chunk of money that leaves your account each week, you are often perplexed by the seemingly meager amount that goes toward paying your principal balance.

Use this empty feeling to your advantage and prepare yourself to help make this feeling disappear. Here are just some of the ways to reduce the burden:

  • The easy way – Make more than the minimum payment
  • Consolidate and Refinance – A good first start for those who want to lower their interest rate and the convenience of one payment.
  • The unrealistic way (for most) – Pay off the balance
  • Use bonus or extra money that your lucky enough to come across to pay down principal.
  • In today’s gig economy, it’s easy to start making extra money. Use this extra money to pay extra principal.

There are other ways too, such as working in public service which may entitle you to loan forgiveness, but the options above are the best choices for most.

If your scraping by (who isn’t), then you may want to focus on increasing your income through side gigs until you’re on more solid financial footing.

One of the most straight forward ways to squeeze extra dollars for faster principal payments is by budgeting. When it comes to budgeting, you have to write it down. If you’re current budgeting technique is from the little voice inside your head, you’re always going to lose. By writing down your goals and trimming the fat from your budget, you will make it easier to make more actionable and obtainable goals.

Keep in mind that it’s not always best to pay down your student loan debt first. In fact, your student loan debt is probably at a lower interest rate than other debt you carry. In that case, it makes sense to first pay down your higher interest debt before tackling your student loan debt obligations. It may be beneficial to lower your interest rate with student loan refinance options, make the lowered monthly minimum payment, and use that extra cash to pay off your higher interest rate debt first.

Payoff Strategies

There are several different strategies when it comes to paying down debt. Two of the more popular strategies are the debt snowball and debt avalanche methods.

The Debt Avalanche

With this method, you focus on the balances with the highest interest rates. The avalanche analogy comes from focusing on the highest rate and working your way down as you continue to make minimum payments on the remaining balances. On the plus side, you pay off the higher interest rate first and save money, and you will pay off your loans faster. On the downside, you don’t see much happening with the lower balance debt.

The Debt Snowball

In this method you start by paying off the smallest balances and work your way up to the larger balance debt. This method is popular because it allows borrowers to see results quicker. Paying off an account completely is motivating, and it may make it easier to stick to than the debt avalanche method. While it is a motivating method, you’re actually paying off your balances slower than with the debt avalanche method.

Regardless of the method, it’s more important to pick the one that you’re more likely to stick to. Even though the avalanche method gets you to a zero balance before the snowball method, it doesn’t mean anything if you don’t stick with it.

The key is to make a plan and then prepare yourself to make some tough choices, but it doesn’t mean you have to live like a hermit for the rest of your life. Subtle changes can make a big difference over the life of your repayment obligations.

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