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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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Published on May 7, 2019

How to Invest for Retirement (The Smart and Stress-Free Way)

How to Invest for Retirement (The Smart and Stress-Free Way)

When it comes to stocks, I bet you feel like you have no idea what you’re doing.

Everyone who’s not a financial expert has been there. I’ve been there. But, time is passing and you need to be crystal clear with how you’re investing for your retirement.

Otherwise, it’s back to work until you can afford not to. So, how can you invest for retirement when you’re not a financial expert?

You take the time to learn the fundamentals well. If you do, you can grow your wealth and retire happy. The best part is that you don’t need to be a financial expert to make smart investment decisions.

Here’s how to invest for retirement the smart and stress-free way:

1. Know Clearly Why You Invest

Odds are you already know why should invest for retirement.

But, maybe you know the wrong reasons. It’s time you get clear on why you’d like to retire. Here are some questions to help you get started:

  • Will you spend more time with your family?
  • What does retirement mean to you?
  • Are you looking to launch that business you’ve been holding off for years?

Everyone wants to retire but not for the same reasons. Once you’re clear for why retirement is important for you, you’ll focus on making it happen.

Investing in the stock market allows you to take advantage of compound interest.[1] All this means is that your money earns money on top of its interest. A reason why investment in the stock market is one of the best ways to plan for retirement.

2. Figure out When to Invest

“The best time to plant a tree was 20 years ago. The second best time is now.”– Chinese Proverb

It’s true if you’d had started investing when you were 10 years old, you’d have a lot more money than you do today.

The reality is that most people don’t start investing until it’s too late. So, if you’re currently waiting for the perfect time to start an investment, it would be today. Open your calendar and block out 2 to 3 hours to choose how you’ll invest for retirement.

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A quick way to get a snapshot of where you stand is to use Personal Capital. Input all your personal information and spend some time setting your retirement goals. Once completed, you’ll know where you stand with your retirement.

Having a savings account for retirement isn’t planning for retirement. Why? Your money loses value when you factor in US inflation.[2]

3. Evaluate Your Risk Tolerance to Create the Perfect Portfolio

Investing your money well depends on your emotions.

Why?

Because when the market drops most people panic and withdraw their money. On average, the US stock market yields an annual 6% to 7% ROI (return on your investment.) But, this won’t happen if you’re worried about short-term loses.

Before you invest your next dollar, know your risk tolerance.[3] Your risk tolerance determines the number of risky and safe investments you’d have.

Regardless of your investing style, you need to view investing for retirement as a long term game. Know that some years you’ll lose money but recoup this in the long-term.

Avoid watching market-related new. Also, create a double authentication to log in your investment account. This way you’re less likely to withdraw your money.

4. Open a Reliable Retirement Account

Depending on your circumstance, you may need to open a new brokerage account. This is the account is where you’ll invest your money.

If you’re currently working for a company, odds are that they offer a 410K investing account. If so, here’s where you’ll invest most of your money. The only problem with this is that you’re limited to the stock options that are available.

You do have the option to open a separate IRA (individual retirement account.) Here are some of the best brokers:

  1. Vanguard
  2. TD Ameritrade
  3. Charles Schwab

5. Challenge Yourself to Invest Consistently

Committing to invest for retirement is hard, but continuing to do so is harder.

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Once you’ve started investment for your retirement, you run at risk from stopping. Often you’ll want to contribute less, so you’d have more money in your pocket.

That’s why it’s important that you create a budget that allows you to invest each month. If you’re working for a company, you can set a percentage for the amount you’d like to contribute each month. Most people by default contribute 1% but aim to contribute 10% to 15%.

Be the judge for how much you can afford to contribute after covering important expenses. To stay motivated, use Personal Capital to view your net worth.

A benefit to contributing money to your retirement account is not taxed. For example, if you earn $100 and invest 10%, you’d contribute $10, then get taxed on the remaining $90. As of 2019, the most you’re able to contribute towards your 401K is 19K but this can change.

6. Consider Where to Invest Your Money

The most common way to invest your money is in stocks, but it’s not the only way. Here are other ways to invest:

Robo Advisors

Robo-advisors[4] are fancy algorithms that’ll choose the best investments for you. Sites like Wealthfront make it easy for first-time investors to invest their money. You’d input information about yourself and set your risk tolerance.

Then, set your monthly contribution amount and your robo-advisor would do the rest. Robo-advisors charge a fee to manage your money, but less than regular advisors.

Bonds

Think of bonds as “IOUs” to whomever you buy them from.

Essentially, you’re lending money and charging interest. Like stocks, not all bonds are equal. Some will be riskier than others depending on their rating.

Here are the different types of bond categories:[5]

  1. Treasury bonds
  2. Government bonds
  3. Corporate bonds
  4. Foreign bonds
  5. Mortgage-backed bonds
  6. Municipal bonds

Mutual Funds

Picture a group of people dumping all their money in a jar that’s managed by a professional. This is how mutual funds work. The fund manager manages the money looking to earn capital gains (interest.)

One of the best types of mutual funds is index funds. Since these funds don’t try to beat the market and instead follow it, they need less research. Because of this they often charge the lowest fees and yield the best long-term results.

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Real Estate

Yes, buying a home is an investment when done correctly.

Imagine buying a home and using it as a rental property. After repairing it, you receive a monthly surplus check of $100 to $200.

This may not sound like a lot, but repeat this process enough times and you’d earn a large amount of passive income. That’s why real estate is one of the best investments to not only retire but become wealthy.

But, it requires a lot of money to start and you should expect losing money along the way as you learn the process.

Savings Accounts

Your money can still grow in a savings account. Nowadays most online banks offer a 2% annual return. Although the average inflation is higher your money will be available when you need it.

7. Master Disincline to Dodge Short Success

Investing for retirement is a long-term strategy. That’s why you need to master delayed gratification. All this means is delaying short-term pleasure for something bigger in the future. Research shows that those who have delayed gratification are more successful.[6]

So how can you master delayed gratification?

By building your discipline.

Think back to what retirement means to you. A clear purpose will help you avoid withdrawing your money during a market downturn. It’ll help you contribute more towards retirement when you’d want to waste it instead.

Your journey towards retirement will be long, so reward yourself along the way. Choose a reward that’s relevant and meaningful, so that you reinforce positive behavior. For example, after contributing more towards retirement, treat yourself to dinner.

8. Aggressively Invest on This One Investment

I’ve mentioned several types of investments but haven’t covered the most important one.

It sounds cliche but here’s why you’re your best investment towards retirement. The more you know, the more money you’ll be able to make. The more good habits you adopt, the more secure your retirement will be.

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More importantly, investing in yourself is an investment that no one can take away. There’s no market downturn nor tragic circumstance that’ll wipe your knowledge and experience.

But, how can you invest yourself?

Reading books, blogs, and anything that’ll help you learn new topics daily. Listen to podcasts and audiobooks on your commute to/from work.

Save money to buy courses and hire coaches. I used to believe hiring coaches was a waste of money when I could learn the subject alone.

But, coaches see your blind spots and hold you accountable. Hiring the right coach will help you achieve your goals faster than you would’ve alone.

Retire Happy with Excess Money

The key to a secure financial future doesn’t only belong to financial experts.

It’s possible for you and I. What if you were able to retire earlier than most people and weren’t a financial planner? What if you were able to focus on what you enjoy doing the most while your money was working hard for you?

I know this sounds impossible now, but the truth is you’re capable of taking charge of your retirement. I’m not a financial expert but I’ve learned how to invest my money by reading books and learning from others.

Investing your money is scary. So start small and invest a small amount of your money with a robo-advisor. Feel your money drop and rise for a month or two. Then, invest more and keep this up until you’re aggressively saving for retirement.

One day, you’ll wake up with a net worth you’re proud of – confident about your retirement. You now know a few strategies you can use to invest in your retirement. Will you take action to retire happy?

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Featured photo credit: Matthew Bennett via unsplash.com

Reference

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