Balancing financial priorities: 4 tips for managing student loan debt

Most people realize that earning a college degree can help them earn more money.1 But the average 2016 college graduate owes more than $37,000 on student loans2 — and that can be tough to repay when you have other financial priorities.

The good news is that whether you’ve taken on your own student loans or you’re helping your kids pay for school, it’s possible to get a return on your education investment and manage debt.

Here are 4 simple ways you can pay down student loan debt faster:

1. Pay more than the monthly minimum.

In most cases, any amount you pay over your monthly bill will go toward the principal, which will then reduce the amount of interest you owe. And since most lenders let you make prepayments, you could repay your loan faster without penalty.

Helpful hint: Set up auto payments with a little extra added in so you pay more without thinking about it.

2. Balance your budget — and put your budget toward your balance.

The “B” word may not be your favorite thing to talk about. But if added income isn’t on the table, cutting back on spending is a great way to find extra money to put toward your loan. Could you scale back on how often you eat at restaurants? Could you live without cable? Putting a portion of your discretionary spending toward your debt balance now could mean less financial stress later.

Helpful hint: Start by thinking small. Pack your lunch one more time each week. Ignore the 40% off retail coupon in your inbox. Little changes to your spending habits can really add up.

3. Cash in on extra cash.

Every so often we get lucky enough to come into some bonus bucks. Did you get a raise at work? A tax refund? An inheritance? While it’s tempting (and fun!) to use extra cash on a weekend getaway or the latest gaming system, putting it toward student loans can have long-term benefits that a short-term splurge just can’t provide.

Helpful hint: We get that you need to treat yourself sometimes. So even if you don’t want to put all your extra cash toward your student loan, maybe consider using at least half.

4. Think about refinancing.

In some cases, refinancing and consolidating your loans can shave thousands off your total interest. Plus, you could lower your monthly payments and shorten your payment term.

Helpful hint: Explore your options. Talk to a few different refinance companies to find rates for you.

As you pay off student loan debt, remember that more than 44 million Americans are right there with you.2 Putting even a couple of these lessons into practice could help you better manage your debt — and save thousands over the long run.

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[1] Bureau of Labor Statistics data for 2015; Published April 5, 2016.

[2] “A look at the shocking student loan statistics for 2017.” Student Loan Hero. April 6, 2017: https://studentloanhero.com/student-loan-debt-statistics/

The subject matter in this communication is educational only and provided with the understanding that Principal® is not rendering legal, accounting, investment or tax advice. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, investment or accounting obligations and requirements.

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