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Smiling student filling out a student loan application

Most college graduates incur student loan debt as they finance their education, and you can’t rent a car, book an airline flight or purchase anything online without a credit card. Repaying those debts is where most people struggle, however. Debt reduction solutions do exist, and you can successfully follow a debt management program. Here’s how.

Stop Charging

You might think this point is obvious, but you also know how easy it is to charge groceries, bills and vacations. You have good intentions of paying off the credit card debt before the interest charges begin, but then the car needs new tires, an illness forces you to take unpaid time off work or a new pair of shoes calls your name.

Life often gets in the way of good intentions, but credit counselors typically recommend that people who need to get out of debt make a decision to stop charging. Freeze your card until you absolutely need it, cut it up or give it to a trusted friend who will hide it so that you achieve debt reduction.

Commit to repaying debt

Saying you want to reduce debt and doing it aren’t the same thing. You need commitment and a plan if you actually want to reduce student loan debt, credit card debt and other consumer debts. That’s where credit counseling, budgeting and snowballing come into play.

Consider student loan counseling

If you have federal student loans, there are plenty of programs and options to help make repayment easier. But it’s not always easy to know what they are or how they work. Student loan counseling from Take Charge America can help you figure out your options. Your counselor will even get on a conference all with you and your loan servicer to be sure you’re asking the right questions and getting all the information you need. Find out more about TCA’s student loan counseling here.

Snowball your debts until they’re repaid

Along with budgeting, most credit counseling agencies recommend that you pay more than the minimum payment each month. This way, you repay debts faster. However, snowballing takes that approach and tweaks it to ensure you’re making the maximum impact each month and seeing an overall debt reduction that saves you money in the long run. It’s a principle that works especially well when you have multiple debts. While it requires discipline, you’ll see almost instant rewards.

1. Start by gathering all of your debt statements. Use them to list the amounts you owe, including the interest rates, minimum payments due each month and outstanding balances.

2. Rank the debts from highest interest rate to lowest. The debt with the highest interest rate is the one you’ll repay first because you could be wasting hundreds of dollars a month on interest charges if the outstanding balance and interest rate are high.

3. Figure out how much you pay each month toward all your debt. It could be several hundred or several thousand dollars.

4. With the information you’ve gathered so far, you’re ready to set up a repayment schedule.

  • Start by making minimum payments on all but the debt with the highest interest rate.
  • On the debt with the highest interest rate, you’ll apply as much extra cash as possible until it’s repaid.
  • After you repay the first debt, you will take that monthly amount and apply it toward repaying the next debt on your list.
  • Each month, you’ll spend the same amount of money overall on debt repayment, but you’ll be out of debt quickly as you use the snowball method.

Can you imagine how good it will feel when you’re finally debt free? Stop imagining and start doing something about your student loan debt, credit card debt and other debts. With budgeting, student loan counseling and debt management, you could be well on your way to financial freedom.

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