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Student loans are part and parcel with the higher education experience these days, but they certainly need not be a lifelong burden.
With a little budgeting, it may be possible to pay off your loans in a relatively short amount of time while still having money left over for personal splurges, recreational activities, and of course, long-term savings. Keep the following in mind as you budget for your student loan payments:
Balancing Student Loans With Retirement
Paying off your student loans should be a priority, but saving for retirement should be as well; even a few years can make a huge difference in retirement savings, particularly if your employer matches 401(k) contributions.
Keep interest rates in mind as you determine which financial goal to prioritize. If you enjoy a low student loan interest rate, your best bet is to pursue student loan payments and retirement contributions simultaneously.
However, if your interest rate is above eight percent, you might be better off chipping away at your student loan debt for now.
Small Monthly Increases Can Pay Big Dividends
Your budget may be tight, but even an additional $50 per month can garner big savings down the road.
For example, spending 14% of your income towards rent can save you thousands of dollars in interest payments. Depending on how much you’ve taken out, you could pay off your loans years, even decades, sooner than if you’d stuck to the minimum required payment.
Whatever you save on interest now, you could allocate to investments.
If shifting a greater share of your budget towards student loans is a struggle, take baby steps; pay $10 more this month than you did the month before, and continue to work towards larger payments.
Even a college graduate with a modest income can make impressive progress towards paying off student loans. The sooner you pay them off, the less you’ll spend on interest and the more financial freedom you’ll enjoy in the long-term.