Kayleen Bengtson, Business Manager
You know that terrible feeling you get in your stomach when you hear the word debt? Or when you realize that student loans in the US are currently in the trillions? To be candid, it’s sort of terrifying.
Nearly 71% of bachelor’s degrees recipients will graduate with student loans. The current national annual debt amount per student averages at $35,000, according to an analysis of government data by Mark Kantrowitz, publisher of Edvisors. Being among the most indebted graduating class in history, it’s no wonder this topic causes such immense stress for students; we’re carrying the burden of some serious debt. But take heart, do not be discouraged and do not write it off as being a hopeless effort.
After countless hours of research I have compiled a list of 10 tips to help the 71% of you Asburians graduating with student loans:
- Ask Yourself “Why”. First and foremost, you must begin with a clear understanding of why you want to be debt free. Do you want to start a business, dedicate your life to vocational ministry in a third-world country, save for your future family, etc.? You have to have a deeper purpose or goal to anchor and motivate you when you feel like giving up.
- Assess the Damage. To begin this journey you should first find your way into the Financial Aid office in the Admin building. From there, figure out exactly how many loans you have taken out, how much you owe, and how much interest you’re paying. Gain as much knowledge as possible. It’s difficult to get serious about any kind of debt when you don’t know exactly what you’re working with.
- Understand the Basics. Know whether you have a federal or private loan (or both) and the difference between them – usually federal loans have lower interest rates. Know your grace period – usually six months for federal Stafford and federal Family Education loans, nine months for federal Perkins loans. Know your minimum balance – usually very small amount occurring over the course of a decade, or two.
- Prioritize Paying It Off. An undeniable reality of debt is that it will not go away, and it will only get worse over time. The longer it takes you to pay off your debt, the more interest you will accrue and the more you will be paying in the long run. One of the greatest pieces of advice I can offer is to organize and begin paying off the smallest amount of debt first; Dave Ramsey refers to this as the “Debt Snowball Plan”. In essence, this strategy takes the smallest debt and pays as much as possible until paid off, while paying minimum payments on the rest, then adding the first payment to the rest. This builds momentum, providing little victories to keep you motivated.
- Automate Your Payments. One of the best ways to guarantee you stay on track with your debt repayment plan is to automate your payments. The best way to do so is to determine how much you can pay off each month and then talk directly with your bank or loan provider. Almost all banks offer this service. I would suggest making bi-weekly payments; the more often you make payments, the less interest you end up paying and the quicker your loans will shrink. Automating your payments will ensure you never forget a payment and also make saying goodbye to cash a little easier.
- Buckle Down and Cut Costs. You should always pay more than your minimum balance. In order to do so you may need to slim down unnecessary spending. I know, I know the new iPhone comes out in just a few months and you really “needed” another pair of Nikes to add to your collection. I relate. But this is a simple practice of self-discipline. Recognize and accept that you will have to sacrifice a few things now in order to achieve financial freedom later.
- Don’t Accumulate More Debt. This is a vital component in your journey to financial freedom. If you choose to use a credit card I would strongly advise you to only use it for purchases such as gas or groceries, and paying it off monthly. By doing so you will build good credit, which is essential for larger acquisitions such as purchasing a home in years to come. However, paying for a bigger-better-badder truck to boost your ego or a far-too-expensive handbag to improve your social status via credit card that charges 18% interest rates is not worth it. Do not dig yourself an even deeper hole of debt through frivolous spending.
- Manage Your Income. On the flipside, rather than spending money frivolously, make a point to manage money wisely. Once you depart from college and enter into your workplace industry most of you will find that your paychecks will be drastically loftier than minimum wage student payroll. Do not be fooled by your paycheck increase. Manage your finances by budgeting based on a percentage model and track every purchase. Everything.
- Reward Yourself. If you prioritize well and adhere to a budget you will find that there is space for you to leisurely enjoy the finer things you treasure. You do not need to starve yourself of all movie nights, shopping trips or cups of coffee. The idea centers on balance. Rather than going to an overpriced theater once a week, consider saving three-quarters of the cost by renting a Redbox. Instead of a $50 girl’s day shopping budget, make it $20. Or limit your freshly brewed coffee addiction fixes to once a week rather than once a day. Whatever your “thing” is, do that, but do it with intention.
- Rely on the Lord. Do not discount this, fellow students; this is the most vital piece of advice I can offer. The Lord is our source of provision, and I know I am not alone in witnessing His faithfulness. If you have not practiced the act of tithing I would highly encourage you to begin praying about how you can honor God through this commandment as an act of worship. We serve a good, good Father, one whom we can rely on in times of doubt, stress, and fear.
Getting out of debt requires us to reframe our thinking of the subject matter; we must pinch, pinch some more and we must sacrifice now for freedom later. We must rely on God when we don’t see the fruit of our labor. But ultimately, we are certainly not alone in this journey of seeking financial freedom.