Steps Towards Financial Freedom
For HENRYs — High Earners [who are] Not Rich Yet — this high salary often comes at the expense of hefty student loans or other types of debt. Tackling this debt now can allow you to put your salary to its highest and best use. But where should you begin? Below, we discuss a few tips and strategies you can use to navigate student loan debt as a HENRY.
Evaluate Your Loan Repayment Options
If you have federal student loans, multiple repayment options are available, including standard, extended, and income-driven repayment plans. Income-driven plans may not be the cheapest option if you have a high income. These plans can help you pay down your student loan debt faster than a standard plan, which usually amortizes your total debt over 120 monthly payments. Private student loans also have various repayment options, many overlapping with federal loan repayment options.
Consider Refinancing
Refinancing may broaden your horizons if you're unhappy with the repayment options available. Although refinancing federal loans may eliminate your eligibility for certain benefits like public service loan forgiveness, it can also help lower your interest rate or give you more repayment options. Shop around for competitive rates from private lenders.
Prioritize High-Interest Loans
If you have multiple student loans with varying interest rates, pay off the loans with the highest interest rates first. By focusing on these high-interest loans, you'll be able to minimize the total amount of interest paid over the life of the loans, which will accelerate your debt payoff timeline.
Make Extra Payments
High earners often have the financial flexibility to make extra payments towards student loans beyond the minimum monthly requirement. Consider setting aside additional funds to pay these loans off more quickly and reduce the overall interest paid.
Automate Payments
Set up automatic student loan payments to ensure you never miss a payment. Many lenders also offer autopay discounts as a 0.25 or 0.5 percent reduction in your interest rate. Automating your loan payments can also help you stay disciplined and consistent with your debt repayment goals.
Maintain Emergency Savings
While it's important to prioritize paying off student loan debt, it's also essential to maintain a sufficient emergency savings fund to cover any financial setbacks. The last thing you want to do is be forced to take on high-interest debt to cover an unexpected expense.
Important Disclosures:
Content in this material is for educational and general information only and not intended to provide specific advice or recommendations for any individual.
This article was prepared by WriterAccess.
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