It’s no surprise that millennials are the most educated generation to date. Almost 27% of those born between 1981 and 1991 holds a Bachelor’s Degree or higher.¹
However, the benefits of holding a degree are sometimes outweighed by the debt that comes with earning it. The average millennial is graduating with approximately $30,000 in student loan debt.² And unfortunately, the net worth of this generation isn’t increasing, meaning they have fallen behind their earlier-generation counterparts in preparing for retirement. But that doesn’t mean that 20- and 30-somethings should give up planning for their financial future. It just means that debt management should become a big part of their savings strategy.
Student Loan Repayment Strategies
These strategies can help accelerate the payoff of student loan debt:
- First, focus on paying off debt with the highest interest rate. This may include credit card debt as well as student loans. Paying off these obligations as quickly as possible can save hundreds or even thousands of dollars in interest payments.
- Next, address the smallest loans. For those with multiple student loans, work to pay off the smallest balance first. Checking off smaller loans can offer a sense of accomplishment and reduce the number of required monthly payments.
- Set up an automatic payment plan. Some student loan servicers provide a discount if the loan is auto-paid. Additionally, auto-payments are just that – automatic. No need to remember to make payments or risk missing the due date which can negatively affect credit scores and result in extra fees.
- Look into loan consolidation. Consider consolidating multiple loans into one monthly payment. Doing so can help save interest fees and eliminate one or more monthly payments.
- Research refinancing options. Check around for lower interest rates. This can help save thousands of dollars over the life of a loan and free up more monthly income to make additional payments.
By following these tips, millennials can eliminate student loan payments from their monthly expenses faster, allowing them to focus on saving for short-term, mid-term and long-term financial goals.
Interested in seeing how quickly you can pay off your debt? Check out the accelerated debt calculator.
¹ Source: https://www.nytimes.com/2015/08/02/opinion/sunday/were-making-life-too-hard-for-millennials.html
² Source: https://www.thebalance.com/how-millennials-can-get-out-of-debt-4156513