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10 Strategies to Reduce And Repay Your College Debt

10 Strategies to Reduce And Repay Your College Debt

When I finished college, I was lucky to find a great job in my field in less than a year. That was the good news. The bad news was that I had a lot of college debt. I had attended a wonderful, but pricey university. Because I was in an academically challenging program, there were several semesters where I opted to live on loans rather than working. That’s something I now look back on with regret.

I can now happily say that I am debt-free (at least as far as college loans go). It took a while to make it happen, and I learned a few tough lessons along the way. If I had to go back and do things over again, there are definitely some decisions I would reconsider.

Knowing what I know now, here are 10 strategies I would like to pass on to current and prospective college students to help you avoid my mistakes:

1. Apply For Scholarships

I was fortunate enough to receive a small scholarship through a foundation that my father’s employer started. It definitely helped. I wish that I had sought out more scholarship opportunities. Unfortunately, at the time I assumed that these were limited to academic superstars and athletes.

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What I know now is that there are thousands upon thousands of dollars in untapped scholarship funds. These funds are rewarded by a variety of groups and organizations. They are given to students who a pursuing specific career paths, who are able to write convincing essays, who have a history of community service – even students who are exceptionally tall. Do your research and you will likely find at least a handful of scholarships you qualify for to apply to.

Here are some sources to consider:

  • Your local Chamber of Commerce
  • Fraternal organizations and charities
  • Your employer and your parents’ employers
  • Associations and trade unions in your field of choice
  • College and high school alumni associations

2. Seriously Consider Work-Study

This is where I made a big mistake. I didn’t want to work a part-time job off-campus because the standard 20 to 25 hours per week was just too much for my demanding schedule. However, if I had taken a work-study job for twelve to sixteen hours each week, I could have cut the amount of student loan funds that I allocated to personal, living expenses by about half. Considering the high amount of interest that student loan debt accrues, that can be pretty significant.

3. Trade Service for Tuition or Loan Forgiveness

In addition to offering scholarships, some companies will reward students, especially employees, with college funds if they participate in a minimal number of customer service hours. Students who are willing to really commit a significant chunk of time to serving others can participate in government programs that offer tuition payments or loan forgiveness in return for service. However, it is important to note that many of these programs require 10 to 12 months or more of service. Examples of service opportunities include: AmeriCorps, Fema Corps, Peace Corps, and Teach For America.

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4. Look Into More Interest-Friendly Options

Private student loans can be expensive. This is especially true because most college students have not established the credit-worthiness or accumulated assets that they can leverage to negotiate loans at better terms. One thing to consider is asking your parents or another supportive family member to help you to finance your education by co-signing or taking out loans in their names. For example, a personal loan that your parents secure with a certificate of deposit at their hometown bank may be half the interest of an unsecured student loan from a large bank.

5. Avoid For-Profit Schools

The two best ways to deal with student debt is to simply pay less tuition and attend a school with a great post-graduate employment rate. One of the best ways to make this happen is to steer clear of for-profit schools in favor of public and private colleges and universities. You will pay significantly lower tuition rates and increase your chances of obtaining a good job post-grad. If you choose to, you will also increase the likelihood that you will be accepted into a decent graduate program.

6. Cut Back on Spending and Delay Major Purchases

Once you have finished school, it is time to sit down and create a five-year financial plan. If you have a lot of debt coming out of school, this plan should focus on reducing spending and being conservative when it comes to taking on new debt.

It is also important to prioritize ensuring that your student loan payments are made without fail. This way, if there is ever a significant financial emergency in the future, you are in a better position to renegotiate terms. For some graduates, this may mean finding alternative ways to deal with emergency expenses. According to First Choice Title Pawn, there are easy ways to get quick cash in the case of emergencies, while still keeping up with your other financial obligations.

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7. Consider Community Colleges and Public Universities

If you are unsure about your major or the career you want to pursue, are you sure you want to go into thousands of dollars in debt to attend a private university? Many students opt to do this and end up owing banks and the federal government lots of money.

If you do have your heart set on attending a private college or your future goals require that you attend a four-year college, take a look at commuter schools and community colleges anyway. You may be able to earn credits during summer sessions by taking a couple of classes at the local community college that you can apply towards your degree.

8. Start Paying Down The Debt Immediately

Many students don’t realize this, but you don’t have to wait until graduation to begin making payments. Even small payments made while you are still in school can help you to reduce your overall debt. This is good information to pass onto your parents as well, if they have committed to helping you pay down your debt.

9. Pay More Than The Minimum Payment Each Month

If it helps, think of your student loan payments like you would a mortgage payment. If you only pay the minimum, the terms of your loan could stretch for decades. However, if you double your payments, or make a second payment each month, you can significantly reduce the length of your loan. Just keep in mind that all loans vary, and ask your lender for information on their specific policies.

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10. Consider Career Paths That Earn Loan Forgiveness

If you are interested in a career that serves others, you may be qualified for full or partial student loan forgiveness. Students entering fields such as nursing, social work, and public education can often have their debt reduced or even eliminated altogether. Just be aware that there are restrictions. For example, a teacher willing to work for five years in the public school system is more likely to qualify than a teacher who goes to work for an elite private school.

Student loan debt is a real problem. It significantly impacts the quality of life of many college graduates, and has also become a matter of political concern. By using the tips outlined above, you may be able to reduce or even avoid taking on too much crushing debt.

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Last Updated on August 20, 2019

How to Set Financial Goals and Actually Meet Them

How to Set Financial Goals and Actually Meet Them

Finances can push anyone to the point of extreme anxiety and worry. Easier said than done, planning finances is not an egg meant for everyone’s basket. And that’s why most of us are often living pay check to pay check. But did anyone tell you that it is actually not a tough task to meet your financial goals?

In this article, we will explore ways on how to set financial goals and then actually meet them with ease.

5 Steps to Set Financial Goals

Though setting financial goals might seem to be a daunting task but if one has the will and clarity of thought, it is rather easy. Try using these steps:

1. Be Clear About the Objectives

Any goal (let alone financial) without a clear objective is nothing more than a pipe dream. And this couldn’t be more true for financial matters.

It is often said that savings is nothing but deferred consumption. Therefore if you are saving today, then you should be crystal clear about what it is for. It could be anything like kid’s education, retirement, marriage, that dream vacation, fancy car etc.

Once the objective is clear, put a monetary value to that objective and the time frame. The important point at this step of goal setting is to list all the objectives, however small they may be, that you foresee in the future and put a value to it.

2. Keep Them Realistic

It’s good to be an optimistic person but being a pollyanna is not desirable. Similarly, while it might be a good thing to keep your financial goals a bit aggressive, going out of the line will definitely hurt your chances of achieving them.

It’s important that you keep your goals realistic in nature for it will help you stay the course and keep you motivated throughout the journey.

3. Account for Inflation

Ronald Reagan once said – “Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hitman”. And this quote sums up the best what inflation could do your financial goals.

Therefore account for inflation whenever you are putting a monetary value to a financial objective that is far away in the future.

For example, if one of your financial goal is your son’s college education, which is 15 years hence, then inflation would increase the monetary burden by more than 50% if inflation is mere 3%. So always account for inflation.

4. Short Term vs Long Term

Just like every calorie is not the same, the approach towards achieving every financial goal will not be the same. It is important to bifurcate goals in short term and long term.

As a rule of thumb, any financial goal, which is due in next 3 years should be termed as short term goal. Any longer duration goals are to be classified as long term goals. This bifurcation of goals into short term vs long term will help in choosing the right investment instrument to achieve them.

More on this later when we talk about how to achieve financial goals.

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5. To Each to His Own

The journey of setting financial goals is an individualistic affair i.e. your goals are your own goals and are determined by your want to achieve them. A lot of times we get on the bandwagon of goal setting only to realize later on that it was not meant for us.

It is important that your goals are actually your goals and not inspired by someone else. Take a hard look at this step at all the goals you’ve set for after this step, you will be on the way to achieve them.

By now, you would be ready with your financial goals, now it’s time to go all out and achieve them.

11 Ways to Achieve Your Financial Goals

Whenever we talk about chasing any financial goal, it is usually a 2 step process –

  • Ensuring healthy savings
  • Making smart investments

You will need to save enough; and invest those savings wisely so that they grow over a period of time to help you achieve goals. So let’s get down to ensuring healthy savings.

Ensuring Healthy Savings

Self realization is the best form of realisation and unless you decide what your current financial position is, you aren’t heading anywhere.

This is the focal point from where you start your journey of achieving financial goals.

1. Track Expenses

The first and the foremost thing to be done is to track your monthly expenses. Use any of the expense tracking mobile apps to record your expenses. Once you start doing it diligently, you would be surprised to see how small expenses add up to a sizeable amount.

Also categorize those expenses into different bucket so that you know which bucket is eating the most of your pay check. This record keeping will pave the way for cutting down on un-wanted expenses and pump up your savings rate.

2. Pay Yourself First

Generally, savings come after all the expenses have been taken care of. This is a classical mistake which almost everyone of us do. We pay ourselves last!

Ideally, this should be planned upside down. We should be paying ourselves first and then to the world i.e. we should be taking out the planned saving amount first and then manage all the expenses from the rest.

The best way to actually implement is to put the savings on automatic mode i.e. money flowing automatically into different financial instruments (for example – mutual funds, retirement corpus etc) every month.

Taking the automatic route will make us lose control of our money and hence will compel us to manage in what’s left with us thereby increasing the savings rate.

3. Make a Plan and Vow to Stick with It

Budgeting is the best to get around the uncertainty that financial plans always pose. Decide in advance how spending has to be made.

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Nowadays, several money management apps and wallets can help you do this automatically. It’s easy and who knows, you may just end up doing what people fail to do.

At first, you may not be able to stick to your plans completely but don’t let that become a reason why you stop budgeting entirely.

Make use of technology solutions you like. Explore options and alternatives that let you make use of the available wallet options and choose the one that suits you the most. In time, you will get accustomed to making use of these solutions.

You will find that they make it simpler for you to follow your plan, which would have been difficult otherwise.

4. Rise Again Even If You Fall

Let’s be realistic. It’s not like the world will come to an end if you made one mistake. This isn’t called leniency but discipline.

If you fail to meet your budget for a month, don’t give up the entire effort just like that. Instead, start again.

Remember that flexible plans are the most realistic plans. So go forward and try to follow your financial goals as planned but if for some reason, the plan gets out of hand for you, do not give up on it just yet. This has a lot to do with your psychology rather than any material commitment.

All you have to do is to stay on the road and vow to stay on it, no matter how much you fall down.

5. Make Savings a Habit and Not a Goal

In the book Nudge, authors Richard Thaler and Cass Sunstein advocate that in order to achieve any goal, it should be broken down into habits since habits are more intuitive for people to adapt to.

Make Savings a habit rather than a goal. While it might seem to be counter intuitive to many but there are some deft ways of doing it. For example:

Always eat out (if at all) during weekdays rather than weekends. Usually weekends are expensive. Make it a habit and you would in turn be saving a great deal.

If you are travelling buff, try to travel during off season. Your outlay will be much less.

If you go out for shopping, always look out for coupons and see where can you get the best deal.

So the key point is to imbibe the action that results in savings rather than on the savings itself, which is the outcome. Focusing on the outcome will bring out the feeling of sacrifice which will be harder to sustain over a period of time.

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6. Talk About It

Sticking to the saving schedule (to achieve financial goals) is not an easy journey. There will be many distractions from those who are not aligned with your mission. And it would be rather easy to lose the grip over your discipline.

Therefore in order to stay the course, it is advisable that you keep yourself surrounded with people who are also on the same bandwagon. Daily discussions with them will keep you motivated to move forward.

7. Maintain a Journal

For some people, writing helps a great deal in making sure that they achieve what they plan.

So if you are one of them, maintain a proper journal, where you write down your goals and also jot down the extent to which you managed to meet them. This will help you in reviewing how far you have come and which goals you have met.

Use this journal to write down all essential points such as your short term, mid term and long term goals, your current sources of income, your regular expenses which you are aware of and any committed expenses which are of recurring nature.

When you have a written commitment on paper, you are going to feel more energised to follow the plan and stick to it. Moreover, it is going to be a lot more easier for you to follow you and track your progress.

At this point, you should be ready with your financial goals and would be doing brilliantly with savings; now it’s time to talk about the big daddy – Investments.

Making Smart Investments

Savings by themselves don’t take anyone too far. However savings when invested wisely can do wonders and we are at that stage where we will talk about making smart investments.

8. Consult a Financial Advisor

Investments doesn’t come naturally to most of us therefore rather than dabbling with it ourselves, it is wise to consult a financial advisor.

Talk to him/her about your financial goals and savings and then seek advice for the best investment instruments to achieve your goals.

9. Choose Your Investment Instrument Wisely

Though your financial advisor will suggest the best investment instruments, it doesn’t hurt to know a bit about them.

Just like “no one is born a criminal”, no investment instrument is bad or good. It is the application of that instrument that makes all the difference.

Do you remember we talked about bifurcating financial goals in short term and long term?

It is here where that classification will help.

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So as a general rule, for all your short term financial goals, choose an investment instrument that has debt nature for example fixed deposits, debt mutual funds etc. The reason for going for debt instruments is that chances of capital loss is less as compared to equity instruments.

10. Compounding Is the Eighth Wonder

Einstein once remarked about compounding,

Compound Interest is the eighth wonder of the world. He who understands it, earns it… He who doesn’t… Pays it.

So make friends with this wonder kid. And sooner you become friends with it, quicker you will reach closer to your financial goals.

Start investing early so that time is on your side to help you bear the fruits of compounding.

11. Measure, Measure, Measure

All of us do good when it comes to earning more per month but fail miserably when it comes to measuring the investments; taking stock of how our investments are doing.

If there is one single step where everything (so far) can go wrong, it is at this step – Measuring the Progress.

If we don’t measure the progress timely, then we would be shooting in the dark. We wouldn’t know if our saving rate is appropriate or not; whether financial advisor is doing a decent job; whether we are moving closer to our target or not.

Do measure everything. If you can’t measure it all yourself, ask your financial advisor to do it for you. But do it!

The Bottom Line

This completes the list of tips for you to set financial goals and actually achieve them with not so great difficulty.

As you can see, all it requires is discipline. But guess that’s the most difficult part!

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Featured photo credit: rawpixel via unsplash.com

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