Education is expensive. Although some families are lucky enough to save for education, it’s not always enough. Majority of students have to pay their own way through university or college. And starting a career with a ton of debt is not ideal. Pay off your student loan like a boss and build a stronger financial position for your future.
When getting rid off any kind of debt, paying the minimum is not enough. The more money you push towards your loan the less interest rates will hurt you, and the faster you’ll get rid of the debt.
1. Pay the extra money to your study loan
The best thing you can do is to start pushing some money into the loan as soon as possible. The sooner you start paying towards the loan the better. If you can, start adding money towards your loan even while you’re studying.
For example, let’s assume your total tuition is R192 000 at 12% interest. And that the interest remains the same without compounding. That means the bank aren’t charging you extra for the debt.
By paying R1 500 each month during your 3-year course you’ll be paying R54 000 towards your student loan while you’re studying. By starting early, you could be debt-free 4 years sooner than expected.
R192 000 x 12% = R215 040
R215 040 – R54 000 = R161 040 (This is what you’ll be left with after your studies)
R161 040 / R2000 = 80 months (6 years)
R192 000 x 12% = R215 040
R215 040 / R2000 = 107.5 months (9 years)
*These calculations should only be used as an example; this does not reflect your own loan.
2. Continue living the same lifestyle
Yup, you read that right. Don’t leave your student living behind.
You spent the last 3-5 years studying and you’ve finally landed your first real job. And you finally have the opportunity to start living the life you deserve, right?
Wrong! That’s exactly what you shouldn’t be doing. Your focus should be to pay off your debt as soon as possible so that you can truly live the life you want to.
While studying you’ve most probably been living a fairly simple life, so don’t stop now. The longer you keep up a simple life the faster you’ll achieve financial independence.
- Continue living with housemates and share rent and expenses.
- Reduce your entertainment costs like jolling with your buddies, eating out or buying expensive things. You don’t need to stop these things altogether but be conscious about your spending habits.
- You may need some new clothes for work, which is fine, but don’t go overboard. You don’t need the top-of-the-line stuff. Settle for what you can afford.
- Start automating your savings. The more money you put aside now, the better you’ll be in the future.
- A great way to reduce spending is to cook your own meals at home. There are a lot of affordable quick-and-easy recipes out there
Keep in mind. For every R1 000, you’re spending on expensive shoes or a music festival, you’re robbing yourself from paying off your debt.
3. Create a spending plan
Agh budgets! They’re so boring. But they don’t have to be.
We like to think about budgets a little differently, we like to create a spending plan instead.
Changing your mindset about how you use your money will make it a lot easier to manage your money. Budgets usually restrict you from spending. But a spending plan gives you the freedom to spend within your means.
A good spending plan is simple to set up and it’s something that you can use for the rest of your life. You don’t need to check this plan every week or month. As long as you’re disciplined with your spending and you have your spending plan in mind, you’ll be good.
Check out our article on how to create the perfect spending plan and create your today.
4. Create a debt repayment plan
A student loan may not be the only debt that you have. So you’ll need to figure out how you’ll be dealing with all your debt at the same time.
Luckily we’ve done the work for you. It’s up to you to act.
Follow our DIY guide to help you get out of debt.
5. Earn extra money
Work hard while you’re young so that you can take it easy when you’re older.
Here are a few things you can do to start earning extra money:
- If you’re currently employed a good start would be to ask for a raise or promotion. If you’re in a position to take on more responsibility then this is a perfect solution for you.
- Take advantage of overtime if your company offers extra shifts.
- Apply for a higher paying job if possible.
- Start a side hustle business and work on what you’re passionate about.
6. Use the ‘extra’ money
If you get extra money from a raise, your side hustle or if your granny gives you some birthday cash, use that money to help pay off your student loan.
You could break down your extra money into segments:
- 50% goes to debt.
- 30% goes to savings.
- 20% goes to the fun stuff.
Breaking down your extra money like this will get you in the habit of managing your money efficiently.
Student loan debt may not feel like the most urgent finance matter but getting it out of the way as soon as possible will be in your best interest. The sooner you get rid of all your debt, the sooner you’ll be able to save and invest and build financial wealth.
If you do have other debt accounts that you still need to pay off, take a look at the Debt Avalanche Strategy. This strategy is designed to get you debt-free as soon as possible.
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