When my wife and I got married we had to deal with what is now an epidemic: Student Loans. When I speak to couples that are getting married this is far and away the concern that causes the most stress in relationships.
How do we save for a first home? How do afford children?
Like many couples, my wife and I asked the same questions. Here are a few things we did to help get out from under student loans.
1. Commit to making it a priority- One of the most important things you can do is to declare this as a priority for your family and your budget. Make the goal realistic and concrete. If you have $25,000 in student loan debt, make you goal to pay it off in 4 years by paying down $6,250 a year or $520 a month. Make sure to write your goal down and go back to it from time to time to check on your progress. Also write down WHY you want to pay the debt down…to live without the stress, to take a family vacation, etc. This will keep you motivated.
2. Look at Refinancing options- But Be Cautious- A great way to save hundreds or even thousands of dollars each year is to look at options to refinance, or to lower the amount of interest that you are paying to the holder of the loan. For example, if you owe $25,000 at an interest rate of 6% you are paying $1,500 a year in interest. If you could lower it to 3% you would save $750 a year. That is $750 that could be in your pocket or that you could use to pay down your student loans faster.
3. The Power of the Snowball Strategy- One powerful tool in paying down your student loans is what Dave Ramsey, a financial author, refers to as the debt snowball. It is a simple but powerful exercise. Make a list of all your loans from the smallest to the largest. You then pay the minimum payment required to stay current on the all of the loans, and all the extra money you have is paid to the smallest loan. You will obviously pay down that smallest loan quickly and then you can move to the next loan with the same strategy. Each time you pay off a loan you have more money to pay the next one and thus it creates a snowball effect.
4. Automate- Setting up your loans for auto payment is a powerful way to pay down your student loans. It is also a great way to keep you credit pristine as you will never forget to make your payment. You can set up auto pay with the loan servicer or through your bank. If you set auto payment for a little more than the minimum, you owe you will pay down the loan faster and you will never miss that extra $25 of $50 a month.
Student loan can cause a lot of stress in a marriage especially a new marriage. The key is to have a goal and a plan of attack to get them under control. By following the 4 simple steps you are well on your way to paying down your student loans and reducing the stress in your life.