5 Startlingly Simple Money Moves Millennials Should Start Making Right Now

pay off student loans
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Congratulations, new grads!

Here’s your bill…

If not in so many words, this is certainly the sentiment college graduates are welcomed into the “real world” with now.

Debt practically feels like an inevitable part of becoming an adult.

Students graduating with loans this year owe an average of $37,172 in student loan debt, the Wall Street Journal reported in May.

If you took out federal student loans throughout college, you’re likely on a 120-month (10-year) repayment plan and could be debt-free by your early 30s.

But if you hit a rough patch or defer payments for any reason, you could extend the timeline for years.

Avoid letting debt loom over you into middle age by creating a plan early and managing your money well right now — before it gets the best of you.

Here are five strategies to help you wrangle your budget and pay back your student loans faster:

1. Create a Grown-Up Budget

The first step to paying off debt is to get your finances in order.

Map your income, monthly bills and spending on necessities like groceries to get a baseline of what’s coming in and where it’s going.

Where do your student loans fit into your budget?

If you’re already making monthly payments, can you actually afford them? Or are they a huge strain on your budget? What needs to change so you can afford them?

If you’re not already making payments, how much room is in your monthly budget to start paying down debt?

Write this information into a document or spreadsheet so you have it available to help you make decisions about your debt repayment.

2. Take Stock of Your Student Loan Debt

School’s out; you can’t avoid them anymore.

If you haven’t looked at your student loan agreements since you registered for your first semester of courses, it’s time to dust them off and put together a game plan.

You may have loans from several sources — more than one federal loan and possibly additional private loans. Multiple monthly payments and interest rates can make repayment cumbersome — and cost you money.

Revisit your loan agreements, and use the Department of Education’s student loan repayment estimator to find out just how much you’ll pay over the life your loans.

Then figure out how you can reduce that amount.

If you’re already struggling to afford monthly payments or you’re shocked by how much you’ll pay over time in interest, refinancing could help.

Student loan refinancing combines your complicated loans into one simple monthly payment. You may be able to reduce how much you owe each month and/or get a lower interest rate to save money over time.

Find a new rate and options at Credible.com, a marketplace that lets you see personalized rates from multiple refinancing lenders.

Seeing your offers on Credible won’t affect your credit score or share your information with lenders before you’re ready to proceed with an offer.

3. Check Your Credit Score

Do you know your credit score?

Do you know which of your actions affect it?

Improving your credit score could mean better repayment options and a lower interest rate when you refinance your student loans.

If you haven’t gotten one recently, credit reporting agencies Experian, TransUnion and Equifax each owe you a free credit report once every 12 months. Get those at AnnualCreditReport.com.

If you use a credit card (or cards), you could be eligible for a higher credit limit after graduation.

If you get a new job or a significant pay hike, try calling your credit card company to ask for an increase to your credit limit.

Cut your spending and pay off your card’s balance each month, and this can be a simple way to improve your credit score.

A higher credit score could mean a better deal if you refinance your loans. It could help you get a lower interest rate and favorable repayment terms — saving you money in the long run!

4. Start Saving (Again)

You may have spent the first 18 years of your life saving money for college expenses — and the past four years just scraping by.

But it’s time to start thinking about saving again. Start with a 401(k) through your workplace. If that’s not available, consider an IRA.

You may not be ready to think about retirement, but the earlier you start, the more money you’ll save and earn in interest before retirement.

With an average liberal arts salary, if you start saving at 21, it would take just $25 per week to save over $683,000 by the time you’re ready to retire at 65. At that rate, your annual retirement income would be over $78,000!

Then, automate additional savings through your bank or with an app to build an emergency fund and savings account.

Building an emergency fund of even a few hundred dollars can buoy you through a rough patch. It can ensure you don’t have to sacrifice debt repayment when money is tight.  

5. Revisit Your Taxes

Since you’re no longer in school, make sure you know what you’ll be paying in taxes and what credits or deductions you qualify for.

To avoid owing money to the IRS in April, you may want to adjust the withholding on your W-4 from what you’re accustomed to.

Use the IRS Withholding Calculator to help ensure you’re withholding enough to cover what you owe.

While you pay off your student loans, you can also save money by claiming the Student Loan Interest Deduction. If you’re eligible, you can deduct the amount of interest you pay on student loans, up to $2,500 a year.

Save Money by Repaying Faster

Paying off student loan debt won’t only reduce your stress by getting rid of those pesky monthly payments — but it’s definitely a perk.

Paying faster will also likely help you save money.

While you enjoy the immediate effects of deferment or making minimum payments, your massive student loan bill continues to collect interest.

The longer you take to pay off student loans, the more you’ll pay in the end.

Enact these strategies now, and you could save thousands of dollars in unnecessary payments — and headaches.

Your Turn: What steps are you taking to pay off student loans faster?

Sponsorship Disclosure: A huge thanks to Credible for working with us to bring you this content. It’s rare that we have the opportunity to share something so awesome and get paid for it!

Dana Sitar (@danasitar) is a staff writer at The Penny Hoarder. She’s written for Huffington Post, Entrepreneur.com, Writer’s Digest and more, attempting humor wherever it’s allowed (and sometimes where it’s not).