“The most important investment you can make is in yourself.”
-Warren Buffett
Yesterday, I wrote this post about things to consider when taking out College loans. As Warren Buffett mentions in the quote above, I still believe that taking out a college loan is one of the best investments you can make for yourself. Now that you are out of school and in the midst of your career, here is some quick advice on how to tackle your College loans.
- Write off the interest–“You can deduct up to $2,500 of student loan interest paid in a given year. As with many tax rules, there is an income limit to this deduction. Your modified adjusted gross income cannot be more than $80,000 (or $160,000 for married couples filing jointly).” (Source: Huffington Post)
- Refinance– The national interest rate for federally funded college loans sits at 4.45% as of August, 2017. If you have any loans higher than that, see if you can refinance and lock in the rate now before they go up. If you took out a private loan, which often has interest rates much higher, see if you can consolidate those loans as well into a lower interest rate. Doing so could save you thousands of dollars over the course of a loan.
- Tackle loans with the highest interest rates first (credit cards included) — For those of you who have more than one loan, I recommend that you find the loan that has the highest interest rate and pay that note first, then move to the next loan. Alternatively, you could tackle the smallest loans first, because who doesn’t love to see a loan balance hit zero!
- Pay $100 extra a month — Speaking of tackling your loans, try to pay $100 extra each month on your loans. ANY extra you can pay now will get you out of debt faster.
- Live in a less expensive place — Before you purchase a house or even pay extra rent for a nicer place, consider staying in a less expensive place or get roommates in order to pay off your loans faster. A few years of having less now will pay off in a great way later in life.
- Live like a college student — Consider all the finer points of college life and stick with that level of spending for a period until you pay off your loans, or at least put a big dent in them. The same goes if you all of sudden get a raise, or come into more money with a new job/side-hustle. Set your budget and any extra that comes in each month, use the extra money to pay more on your loans.
Here is a free budgeting tool that will help you think about your college loans and credit card debt. Half of the battle is understanding the situation you find yourself in and this tool will help get you moving in the right direction.
Thanks, and please let me know what strategies you have used to pay off your college loans at a faster pace.