5 Steps to Pay Off Your Student Debt Faster
Higher education is getting more and more expensive. In 2018, the average undergraduate student studying in Australia paid 6.2% more in tuition fees than they did in 2017; that’s almost four times more than the rate of inflation for the year. This means that students studying in Australia are graduating with more and more student debt.
Upon graduation, paying off student loan debt should be one of the top priorities. Read on for some easy steps that will walk you through how to pay off your student loans faster.
Step 1: Understand your debt.
The first step toward paying off student loans, or any loan for that matter, is to have a thorough understanding of what you owe and where. As the old adage goes, what gets measured gets managed, and if you don’t have a clear picture of your debt situation, it’s going to be difficult to pay it off in the most beneficial way possible.
Start by understanding all the sources of your debt – which could include HECS-HELP, a bank loan, and so on – and then look to understand the interest rates you’re paying on each individual loan.
Step 2: Make a budget and track your spending.
Once you understand your full debt picture, the next step is to make a budget and track your spending. Making a budget doesn’t have to be scary; just add up all your monthly sources of income, and then list out your general expenses money each month. The key is to track your spending so that you know how much money is coming in and going out. This will give you a clear picture of how much money you can allocate to debt repayment each and every month.
Step 3: Pay off high-interest debt first.
When you’re ready to start making regular debt repayments, you’ll want to focus on paying off the highest-interest debt first. This is because the higher the interest rate, the more you’re paying for the privilege of using those funds. Pay off the highest-interest debt first, then move to the debt with the next-highest interest rate, and so on. If you have an HECS-HELP loan, your repayments will automatically be added to your tax assessment each year once you start earning above the year’s minimum threshold.
Step 4: Find ways to make extra money.
Consider taking on a part-time job or side hustle to bring in some extra cash. This can be a great option to help you accelerate your debt repayments. Not sure where to start? Sites like freelancer.com and airtasker.com can give you some ideas of the types of work that people are willing to pay for.
5 Steps to Pay Off Your Student Debt Faster Click To TweetStep 5: Apply any raises you’re given toward your student loan repayment.
When you earn a raise at work, it’s time to celebrate. Don’t be so quick to spend all of that extra money each month, though! Consider putting a portion of those funds towards your debt, which will help you pay it off faster and free up even more money to spend on things that are important to you. A great guideline is to put at least 50% of any raises you’re given toward debt repayment or savings.
Conclusion
Paying off debt is a lot less intimidating when you’ve got a clear understanding of what you owe, and a clear plan of attack to tackle that debt and get it paid off as soon as possible. By following the steps outlined in this article, you’ll be well on your way to paying off your student loan faster.
