Repaying Your Student Loans

Thirty-seven million student loan borrowers will be required to resume their monthly payments in October, more than three years after the federal government paused them due to Covid-19.

I paid off $300,000 of debt, including $72,000 of student loans in three years, and now serve as a financial coach to help others pay off their debt faster toward financial independence.

Instead of waiting for the next government announcement on the student loan pause, here are four simple steps you can take today if you’re worried about repayments resuming.

Schedule A Consistent Monthly Budget To Review Your Student Loan Progress

A total of $1.75 trillion in total student loan debt (including federal and private loans) with $28,950 owed per borrower on average will soon be added to the financial plans of people who already might have had difficulty making ends meet.

Delaying the inevitable will not make the problem of repayment any easier. So, rather than avoid it, start a regular monthly budgeting routine, if you’re not on one already.

I recommend scheduling your budgeting time for the same day every month for one hour, and use that time to decide how you will balance your other bills with your student loans.

In particular, limit last month’s budget review to less than 10 minutes of your one-hour budgeting session. It’s helpful to know where there might have been leaks or surprise expenses, but what’s done is done. Instead, spend the majority of the time to start planning ahead.

Focus On The Lowest Balance First Instead Of The Total Amount

I just said plan ahead. But it can feel disheartening when you try to think of paying off the total amount. Millennials have felt the financial impact of student loans. The median net worth of Millennials ages 35 to 44 is 20% lower than that of the Baby Boomers and Generation-X at the same age, according to the Survey of Consumer Finances in 2019 .

I personally found the debt snowball method to be the most effective in keeping me motivated and on track. That’s because I had $72,000 of loans that were split among multiple smaller loans taken out each semester I was in school.

Rather than overwhelm myself with planning for the whole amount all at once, I put each loan on minimum payments and planned to first pay off the first $5,000 loan with the extra payments. By budgeting one month and one loan at a time, you can focus on doing your best to spend within your plan and avoid financial decision fatigue.

Re-Allocate More Money Toward Your Student Loans By Consolidating Your Other Accounts

A study commissioned by Chase found 55% of Americans with recurring payments don’t know exactly how much money is automatically taken out of their account on a monthly basis.

Before you try putting extra money toward your student loans, start:

  • Paying off any high-interest credit cards to increase your monthly cash flow;
  • Canceling subscriptions you can do without for now (you can always re-subscribe later);
  • Consolidating multiple checking accounts into one;
  • Closing any savings accounts that aren’t high-yield ;
  • Consolidating investment accounts such as old 401(k)s into one individual retirement account or rolling them over into your current 401(k).

When I first started gathering my accounts to find extra cash to pay off my student loans, I had more than 40 different ones to keep track of on a monthly basis. This made paying my student loans feel even more daunting.

Once I streamlined my finances to no more than roughly 20 bills and accounts to track, I could more easily identify money that was leaking out as interest payments and unnecessary expenses.

Give Yourself Six Months To Readjust To Repayments

Your plan will not go according to plan, as unexpected expenses will inevitably come up. A successful long-term approach requires some flexibility. Don’t give up if you are not able to pay as much money as expected during the first few months.

The first time I budgeted after resolving to pay down my student loans, it took hours to get everything organized. My husband and I were trying to look at so many different line items. I also had to spend time reading the documents I signed, talking to my loan service providers, and researching options for repayment or consolidation.

But after about six months of regularly scheduled meetings, you’ll feel it gets easier and easier every single time, especially after you have all your research completed.

Even if you don’t have an extra dollar right now to pay your student loans, starting these four steps will move you in the right direction once the pause ends.

By Bernadette Joy, Contributor

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