Student loan debt is at all-time high of $1.3 trillion – and that figure continues to climb. The average college graduate walks away with more than $30,000 in college loan debt.
Student loan debt can quickly accumulate, but while people are in school, it’s often just a number. Many students figure once they start making money when they graduate, they’ll be able to pay back their loan without a problem. But after they graduate, they realize the amount they owe may be the equivalent to the cost of a car, boat or down payment on a home.
It’s often heard that student loan interest can have potential tax benefits, which can be misinterpreted to mean that student loan interest rates don’t matter or that any interest paid is given back in the form of a tax refund. This isn’t the case. A tax advisor can discuss more about what the potential tax benefits mean, but students shouldn’t look at the interest they’re paying as inconsequential. To put it in perspective, multiply the payment amount by the number of months of payments. This can put the debt in perspective by showing how much you’ll end up paying in return for the amount initially borrowed.
To save money, graduates should try to pay off loans as soon as possible. Take a look at your income and spending and try reworking your budget so you can pay a bit more per month on your loans. Even an extra $50 per month can help. Additionally, put your tax refunds, pay increases, bonuses and any extra money you earn or receive toward your debt.
Another way to save more each month is to look at your budget before you spend. Understand exactly how much you can afford before pulling out your debit card, rather than figuring out where you’re left after spending. Another option is to only use cash to pay for things. This way you’ll only spend what’s in your wallet, making it more likely you’ll stick within your budget.
Remember that knowledge is power. It can be uncomfortable to think about debt and owing a lot of money. But the more you take control of it, the better you’ll be able to position yourself. Find out if you can pay ahead or make extra payments now to help chip away at your debt faster. Also look into income-based repayment plans, graduated repayment, extended repayment and other payment options.
Whatever your situation, Bank Mutual can help you meet your financial goals. Our personal bankers will work with you to establish where you are now and where you want to be in the future. From there, we’ll come up with a plan together to help you achieve every milestone in life.