Debt can be a daunting and overwhelming experience. Whether it's credit card debt, student loans, or medical bills, it can quickly spiral out of control and leave you feeling helpless. However, it is important to remember that there is always a way out of debt, and there are many debt management tips that can help you gain control of your finances.
Student Loans are a debt many students take on to help pay for school. Repayments for federal student loans begin six months after you graduate, withdraw from school, or go below half-time (6 credit hours for undergraduate; 5 credit hours for graduate). There are many different repayment plans for loan borrowers to choose from, the most common being income-driven repayment plans. Federal student loan repayments are handled by a loan servicing center, or a company that the federal government assigns to handle the billing and other services on your federal student loan on their behalf. For more information on repayment plans, your loan servicer, or to see a dashboard of your current federal student loan, go to studentaid.gov.
It is always recommended to pay more than the minimum payment (if possible) to get out of debt quickly and save you money on interest. Do not take on more debt if you feel overwhelmed by your current amount of debt. There are two strategies for approaching a large amount debt to help break the debt down into more manageable pieces.
The first strategy is called the snowball method. In this method, you take the smallest debt you owe first and pay it off. You then gradually pay off all of your debts, working your way from smallest to largest. For example, let’s say a person has $100 in credit card debt, $7,000 in a car loan, $20,000 in student debt, and $500 in medical debt. With the snowball method, the person would first work on paying off their $100 credit card debt. Next, they would focus on paying off their $500 medical debt. After that, they would focus on paying off their $7,000 car loan, until the only debt they have remaining is their student loan debt. They could then focus on quickly paying this off last. This strategy is useful for people who are still building their financial stability.
The second strategy is called the avalanche method. This method is the opposite of the snowball method. You focus on your largest debt first and pay it off as quickly as possible. You then work your way down to your smallest debt. Using the same example above, let’s go back to the person who has $100 in credit card debt, $7,000 in a car loan, $20,000 in student debt, and $500 in medical debt. With the avalanche method, the person would first work on paying off their $20,000 student loan debt. Next, they would focus on paying off their $7,000 car loan. After that, they would focus on paying off their $500 medical debt, until the only debt they have remaining is their $100 credit card debt. This strategy saves you more on interest payments over time.
