Millions of Americans feel the great burden of their student loan debt. On average, graduates now carry an average balance of nearly $30,000 in student loans. Such student debt not only affects your economic situation now, but by making it harder to accrue savings, it affects your future comfort as well.
However, there are a few strategies you can use to make sure your savings account balance increases while your student debt total goes down. Here are several ways you can make that happen:
1. Refinance Your Student Loans
Student loan refinancing is taking out a new loan to pay off the existing loans at a lower rate and combine them into one, which could save you thousands of dollars over the course of your loan. Student loan refinancing is ideal for borrowers who have high interest rate loans, steady incomes, and above average credit scores. These borrowers are frequently able to lower their rates and save significant amounts. At Credible, our average user saves over $11,668 and reduces their interest rate by 2.0%!
2. Invest Instead of Paying Off Low Interest Rate Loans
Many graduates believe the faster they pay off all of their student debt the better. However, that isn’t always the best course of action. If you’ve refinanced your loans to a lower rate or naturally have a low interest rate, then you may be able to get a better financial return by investing rather than completely paying off your loans.
3. Don’t Take on Unnecessary Debt
It is easy to wrack up a balance on your credit card, from the must-have shoes in the window to vacations, as well as other debt like car loans. Every purchase that puts you further into debt, though, should be considered carefully. Will you have the funds to pay the balance on these debts and your student loans? Every time you increase your debt load, it will impact your credit score by increasing your debt-to-income ratio. Further, if you miss student loan payments because of other debts and default, it will negatively impact your credit score for 7 years. In short, be careful before you whip out that credit card or sign on the dotted line for a new car!
4. Set a Budget
Setting a budget is the best way to figure out where you can save. It allows you to see clearly where and how your money is being spent, how you might be able to cut back in a few places, or if something like student loan refinancing could help you balance your budget.
Stephen Dash is a member of the DailyWorth Connect program. Read more about the program here.