Student loan debt doesn’t have to be a never-ending nightmare. Find out how to manage and pay off your debt the financially healthy way! #FinHealthMatters
Dealing with student loan debt isn’t going to be easy.
Like any problem, it’s going to take work to solve.
It’s very similar to a weight problem. If you are trying to lose those extra pounds, you will have to put in the time, hard work, and sacrifice. Same goes for solving your debt problem.
There are healthy and unhealthy ways to lose weight. The same also goes for dealing with student loan debt.
Some people deal with debt by completely ignoring it. That’s not healthy.
Some people deal with debt by complaining about it. That’s not healthy.
Some people deal with debt by playing the victim card. That’s not healthy.
Today I’m going to share with you the financially healthy way to deal with your student loan debt. I’ve summarized it in six steps. This post addresses three different types of students: the high-schooler thinking about taking out student loans, the college student who has already taken out some student loans, and the college graduate desperately trying to pay off their debt balance.
What does “the financially healthy way” mean?
To deal with your debt “the financially healthy way” means that you are in control of your finances. You know your current financial status and you have defined your financial goals. You have a plan to go from point A to point B.
You handle your money with conviction, confidence, and knowledge.
A step-by-step guide to dealing with student loan debt
Step 1: Acknowledge your feelings and stresses about student loan debt
Acknowledging (and writing down, if you have the courage) your feelings towards student loan debt has a lot of power. Don’t skip this step. You might feel scared, embarrassed, ashamed, angry, or resentful. Becoming aware of these feelings will fuel your student loan debt journey. These feelings, likely not good ones, are your starting point.
For the high-schooler. I’m willing to bet you have a lot of fears and concerns about starting college. Will your roommate be a slob? Will you make friends? What will you major in? But is how you are going to pay for college on your radar? If not, it should be! You can no longer rely on your parents to solve all your problems, especially your financial ones. It’s now your responsibility. How do you feel about being in charge of making sure you can pay your tuition bill and living expenses?
For the college student. Are you living in blissful ignorance about your impending student loans bills (like I did) or are your worries keeping you up at night (like so many others)? Are you terrified of the day your first student loan bill arrives?
For the college graduate. It’s okay to feel overwhelmed with your student loans. There are millions of others that are in the same boat. Write down your feelings. In the middle of your debt-free journey, you’ll look back on what you wrote and it will be a good reminder that you never want to be in debt and feel this way again. It will encourage you to keep paying off debt.
Step 2: Assess your entire financial situation, but especially your student loans
This is the research phase. Gather as much information as you can about your financial status. You can’t fix a problem if you don’t know what the problem is.
For the high-schooler. Your first stop is your parents. Find out if they are planning on contributing funds to your college education. Find out how much money you have in the bank. Determine the cost of attending the colleges you are interested in. Look around for scholarships. Gather information about ways to take out loans (I’m not promoting taking out student loans; you should definitely avoid it if you can!).
For the college student. Learn as much as you can about your loans (their balance, when they are due, their interest rate, etc.). Are they accruing interest now, or does the interest start accruing when you graduate? How much money do you earn and spend each month? Find out of if there are scholarships you can apply for (yes, there are MANY scholarships for students already in college).
For the college graduate. You already have loans. The damage is done (or, in much more optimistic terms: the challenge has already been accepted!). Find out everything you can about each and every single one of your debts (even those that aren’t student loans). At a minimum, learn the balance, interest rate, payment due date, and special terms (like the interest rate rises after a certain date). Check your credit report to make sure you are accounting for all of your loans.
Step 3: Define your goals
Now that you have defined your starting point (you know how you feel about your debt, and you know what your debt/money situation looks like), it’s time to start looking forward. You need to define your financial goals so that you can map out a plan. You need to know your desired end goal.
For the high-schooler. Do you want to graduate college debt-free? Do you want to earn/win $10,000 in scholarships?
For the college student. Do you want to minimize the amount of debt you graduate with? Do you want to take out more student loans to pay for the rest of college? Do you want to start paying off your debt now, while still a student?
For the college graduate. Do you want to be debt-free? When do you want to be debt-free?
Step 4: Make a plan
Creating a plan is the critical step to dealing with student loan debt. Without a plan, you’ll get lost is a sea of bills …or worse, you may just grow accustomed to minimum monthly payments.
For the high-schooler. Make a plan for how you are going to be pay for college. It may include a combination of parents’ contributions, your savings, working during the school year and summer, going to a community college for a few years, and student loans (but try to avoid student loans if possible).
For the college student. Make a financial plan for the rest of your time in college. You may also want to make a career plan. You need a job to pay off this debt, so having a plan, and getting the right internships can make all the difference when you graduate.
For the college graduate. You already have debt. It’s your close companion until you pay it off. There are two main methods to aggressively pay off your debt (by aggressive, I mean paying more than your minimum payments). The first is the Debt Snowball Method, where you pay off your debts one by one, from smallest balance to largest balance (of course you pay minimums on all your debts). The second is the Debt Avalanche Method, where you pay off your debts one by one, from the highest interest rate to the lowest. You can also create a customized plan (maybe one debt stresses you out way more than the others so you pay that first).
Step 5: Stick to your plan, even if you have to sacrifice now
What’s the point of having a plan if you don’t stick to it? Paying off student loan debt (or avoiding it completely) is going to take sacrifice.
For the high-schooler. Continue to have open conversations with your parents about finances, work more now to build your savings, apply for scholarships. You might have to sacrifice time and maybe even the limo to prom, but your future financial health is worth it.
For the college student. Continue budgeting, saving money, and applying to scholarships. Don’t spend your student loan money frivolously, work during the school year if you can, and apply to internships.
For the college graduate. Stick to your debt plan. Stick to your budget. Keep your goals in mind.
Step 6: Help others
Financial education isn’t a requirement in school. Some folks get lucky and learn it from their parents, but others are sent off to college without a clue how to budget or a sense of how truly expensive their college classes are. If you have experience or knowledge managing money, help someone else out – a younger sibling, a friend, a coworker, or anyone you see struggling.
Getting rid of student loan debt
Letting your student loan debt lurk around isn’t financially healthy. You need to acknowledge your debt, create a plan to get rid of it, and follow through with your plan. Your financial health matters just as much as your physical health and your mental health.
Are you worried about your starting point (a high-schooler with no financial help from their parents, a college student who has already taken out thousands of dollars in loans, a college graduate six figures in debt)? You can stop worrying about that now. You can get out of this debt. Just follow the steps above, be willing to sacrifice, have a positive mindset, and don’t give up.
Are you dealing with your student loan debt in a financially healthy way?
