In lower than a month, I’ll graduate from my MBA program at Georgetown University with greater than $120,000 in student loans at 7 p.c curiosity. Six months after commencement, my grace interval will finish, and I must begin repaying greater than $1,000 per thirty days. Here is my technique for compensation.
The very first thing I’ve to determine is tips on how to improve my earnings from its present degree. Without extra money coming in, there isn’t any likelihood for me to pay down my debt and preserve my present life-style. Some student loan compensation methods I’m contemplating are taking up one other job whereas I proceed making a living on my hobbies resembling running a blog, graphic design and web site improvement on nights and weekends.
Consolidate My Student Loans
Right now, I’ve 13 student loans excellent. Once the funds begin after my grace interval is up, I’ll have a paperwork nightmare. To simplify the compensation course of and repair my rate of interest, I’m going to consolidate my federal student loans into one loan. Since I wouldn’t have any non-public student loans, I will consolidate via the Direct Loan Consolidation program and keep away from paying loan consolidation charges.
There are a number of student loan compensation plans obtainable to debtors. Recently, a brand new plan was created referred to as the Income-Based Repayment Plan. When I began my enterprise at school, I selected to take a decrease wage so I might reinvest extra in my firm’s development. As a end result, my Adjusted Gross Income was comparatively low final 12 months and the income-based compensation plan could also be the best choice for me. It is probably not the identical for different debtors, so ensure to think about your compensation choices and discover the most effective compensation plan on your scenario.
Manage and Track Spending
One of the keys to profitable student loan compensation is making a price range and sticking to it each month. Personally, I exploit this price range and money stream worksheet to trace the place my cash goes and set spending objectives every month. No matter your technique, discover a technique to maintain your self accountable so that you by no means miss a fee in your student loans.
There are a pair methods I plan to make use of to scale back the quantity of curiosity I pay on my student loans. First, I’m going to make a fee each two weeks, moderately than one fee every month. This technique known as fast compensation. By paying each two weeks moderately than as soon as a month, I’ll scale back the quantity of curiosity I pay dramatically over the lifetime of my loan. Additionally, fast compensation forces me to use one extra fee to my loan every year. If I pay as soon as a month, I make 12 funds per 12 months. If I pay each two weeks, I make 26 bi-weekly funds, or the equal of 13 months of funds every year.
Apply Future Bonuses and Gifts Toward Debt Repayment
Debt compensation requires self-discipline and sacrifice. While I wish to take bonuses and presents and purchase enjoyable stuff, I merely can’t. The high precedence after commencement is to get rid of my student loan debt as rapidly as potential. In the previous, my precedence was increase my emergency financial savings fund. My new aim is to repay my debt. The selection is straightforward. Repaying my student loans is the equal to placing my cash into one thing that returns a set price of seven p.c every year. With rates of interest on financial savings accounts and CDs paying low rates of interest, it makes extra sense to use extra money towards debt compensation. So every time I get additional money in my bank account, I’ll use it to repay my loans first.