Financially Fit Friday with Linda Lingo/Life Changes: Paying Off Student Loans
Last week I talked about preparing your teens to be financially fit. I want to follow up on that idea and talk about how students can be financially wise in paying off their student loans. Unfortunately, I see students graduating from college with huge student loans, and the interest rates are not low, they’re in that 6-8% range.
The first thing college graduates want to do is celebrate getting that diploma and job by buying a new car (more debt) or moving to a much nicer apartment (higher rent expense) or buying a wardrobe for work (more debt). The best advice I’ve seen is from Dave Ramsey who recommends the following strategy:
Make a Budget – Track where every dollar is going so you know where you can cut back.
Pay More than the Minimum – By making larger payments, you’ll be able to reduce the principal balance faster.
Be ready to make Sacrifices – Look at your lifestyle. What luxuries can you do without? Can you rent out a room of that new apartment you had to have? Cook at home, eat out less. Get a second job and put the income from that weekend job toward paying your student loan.
Use the Debt Snowball Method – The debt snowball method has helped millions of people dump their debt, and it can work for student loans, too! Simply list all of your loan debts from smallest balance to largest. Start paying on the smallest balance first. Put every extra bit of money you have into paying off that first debt while still paying the minimums on everything else. Once you’ve paid off your smallest loan, take everything you were paying and apply to the second loan. Keep this up and you’ll have your loans paid off!
Apply every Raise and Tax Refund to your Student Loans – Yep! Everything gets put toward these loans. Don’t raise your standard of living until they are gone!
Here is the link to read Dave Ramsey’s full article:
The relief you’ll experience when the student loans are paid off will be tremendous!!
Empowering Women to Embrace Their Wealth