College is the time when you dedicate yourself to learning about things that will help you for the rest of your life. That’s also true when it comes to money matters. Now that you’re managing your own money you need to learn how to save money as well as how to pay off your debts and student loans. It’s not as hard as you might think. What you need is a little knowledge and a lot of persistence. Even if you have a mountain of debt, it’s possible to pay it off and free yourself from a life of debt servitude. Here’s how.
It’s possible to pay off debt
In a January 15, 2013 article for Forbes.com, “How I Paid Off $90,000 In Debt In Three Years,” contributor LearnVest explained how Stephanie Hood paid off a mountain of debt.
How did she accumulate so much debt in the first place?
- attending college out-of-state which costs more
- funding her undergrad and graduate degrees entirely with student loans
- getting some private student loans instead of government subsidized loans
- not applying for grants or scholarships
- using her credit card for everyday purchases like groceries
By the time she finished college, she had tens of thousands of dollars in student loan debt and credit card debt. Her first job out of college only paid her $50,000. It wouldn’t go far in Washington D.C. where she lived.
The turning point came when she visited the National Student Loan Data System (NALDS) website and calculated her student loan balance. It totaled a whopping $90,000.
Inspired by her boyfriend Rob, Stephanie created a budget to help her find ways to put more of her money toward paying her debts. In her quest to cut living costs to a minimum, Stephanie found that she could save money by making the following changes:
- moved to a cheaper neighborhood and shared an apartment with a roommate
- canceled cable television in favor of streaming video on her laptop
- dropped her health club membership in favor of using the facility at work
Stephanie also got creative about bringing more income to the table with babysitting, mystery shopping and odd jobs. But the best part was how her work situation changed.
“During this process, people at my company noticed what a hard worker I was, and I got five promotions, increasing my salary by $20,000,” Stephanie said.
Ways to pay off credit card debt
It’s so easy to pay for things with plastic that you don’t often realize how much debt you really owe. If you are facing a hefty credit card debt then check out Dawn Papandrea’s article, “6 ways to pay off credit card debt,” from Bankrate.com.
Here’s a look at two of the suggestions from the National Foundation for Credit Counseling:
- snowball method: pay off debt starting with the smallest regardless of the interest rate.
- most expensive first: paying off debt with the highest interest rate first will save you a ton in interest payments. It will also improve your credit score.
When you finally get your debt paid off, make sure that you stop the practices that got you so much in debt in the first place.
More ideas for paying off debt
Sometimes it pays to think like a fool. The Motley Fool staff put together a list, “9 Ways to Pay Off Debt,” with more ideas for you to use.
- pay more than the minimum payment
- use your savings to pay off debt
- renegotiate with creditors
Many people don’t realize that they may be able to negotiate lower payments and even a lower interest rate if they just ask.
“Indeed, many will negotiate away the farm before they’ll write off your debt. As lawyers love to say, ‘everything is negotiable’. Therefore, what do you have to lose, except time? It’s worth a try. And if you don’t wish to do this yourself, organizations exist that can do it for you,” the Motley Staff said.
Where to get help with debt payment
When seeking expert help in managing your debt, be sure to work with a non-profit agency such as the Consumer Credit Counseling Service (CCCS). There are many such agencies located across the U.S. All are members of the National Foundation for Credit Counseling, Inc. (NFCC).
These agencies provide financial literacy training, debt management assistance and housing counseling. They can work with you in-person, by phone or online.
What tips work when you need to manage money and pay off debt? Tell us about them in the comments below.