How to Pay Off Student LoansEmail This Article
It doesn’t necessarily matter when you graduated from college, if you borrowed student loans you may be wondering about the best strategy to tackle them. You may be revisiting your student loan repayment strategy because you’re trying to buy or refinance a house, need to help your child pay for college, or you’re just tired of having that loan payment every month. Whatever the reason, it’s important to know that even large amounts of student loan debt can be conquered. You may just need to get creative. Nearly 70% of students graduate with loans, so you aren’t alone in your situation.
All of the recommendations here are designed to help you cut expenses or extend your income so you can apply your excess cash to college loans. Check out these creative ways to start your journey to a life without student debt.
Budget to Pay Off Student Loans
If you’re serious about paying off your student loans faster, taking an aggressive approach is the best way to do it. Driving a cheaper car or taking public transportation, moving into a less expensive house or apartment, and avoiding splurges are key to freeing up more money to apply toward debt. And you may want to actually track your spend in a simple budget spreadsheet or on an app like Goodbudget Budget Planner that lets you sync and share a budget with a partner or roommate.
Reduce Your Living Expenses
It’s time to have a heart-to-heart with your lifestyle. To create a true budget, you’ll need a detailed snapshot of all your cash flow. Sit down with your laptop and begin to go over every monthly expense you have. You can break your expenses down from necessities all the way to minor luxury items.
- Start with major and fixed bills. Major bills are things such as rent, water and electric. Fixed bills will normally be a phone or car payment you have to pay. Anything there you can cut down on?
Look into cheaper living accommodations or living with roommates. Roommates will help you save on rent and utilities.
Can you afford the car you are driving and the registration and insurance fees that come with it? Driving a less expensive car can impact insurance and registration costs, too.
Insurance costs for auto, renters, or home owners should be shopped at least once a year to make sure you aren’t over paying.
- We all need entertainment in our lives but do you really need Amazon, Netflix, Hulu and HBO? Try to limit yourself to one or two monthly subscriptions. If family members or friends have accounts, plan some movie nights or watch parties. Not only can you save some money on a subscription service, but you can spend some quality time with your friends. This is a great alternative to going out, which can get pretty pricey.
- The last part is the hardest. Look at what you spend on eating out, getting drinks with friends, your morning coffee. Really look at how much you spend (don’t underestimate in this category).
These expenses add up like you wouldn’t believe. Do you eat out three times a week? Do you buy a coffee every day? Do you take your lunch to work?
We understand. Life is busy, and eating out or stopping for coffee on your way to work is convenient. But if you’re doing it multiple times a week, it may be going overboard.
Consider the cost of a five-dollar coffee drink Monday through Friday and eating a ten-dollar lunch, two days a week. That’s an additional $180 dollars per month. When you look at it like that, it’s a good chuck of cash that could be going toward debt.
Try to reduce or eliminate those expenses. Make coffee at home. Instead of an evening out, host a get-together and have each of your friends bring a dish! If you’re not already taking lunch to work, challenge yourself to do it at least a couple of times each week to see the impact on your wallet.
Even if you’ve already cut spending on big-ticket items there are so many small things you can do. By creating an honest budget, you can see where your earnings are actually going, and find categories (like entertainment, vacations, shopping, etc.), where you can spend less.
Sign Up for Automatic Loan Payments
Many lenders offer a small interest rate reduction (example: 0.25%) just for enrolling in automatic payments. This can help prevent missed payments (and the associated late fees and penalties), while also keeping your credit score healthy. Missing scheduled payments can be a setback when it comes to paying your loans off because it means playing catch up. And remember, auto payments do not prevent you from making extra payments! You can always set your auto payment to pay more than the minimum, or log in and pay more.
Make Extra Student Loan Payments Consistently (with Spare Change)
The minimum payment is the least amount of money you need to pay each month. There are no pre-payment penalties with student loans, so even an extra $20 or $30 a month can make a difference. You will pay your loan off faster, and reduce the overall amount you pay in interest.
We’ve been there. Making additional payments can be easy when your budget isn’t tight, but difficult when it is. To become successful at making additional payments you have to be consistent, so why not automate a way to do so? We recommend checking out the ChangEd app. (Yes, there’s an app for that!) ChangEd is an app that allows you to roundup daily purchases or schedule savings based off your habits.
ChangEd will also project how much time and money you can save, as well as encourage you to save more when it sees an opportunity to save more! ChangEd even automates those savings as additional student loan payments so you can stay consistent without thinking about it. They can also provide you with a template letter to ask your loan servicer to apply all those extra payments to your principle, to save you even more money in the long run!
Put Extra Money Towards Your Student Loan Debt
In the same vein, put any unexpected money toward your loans. If you get a tax refund, a birthday check from your Aunt, or a bonus at work, consider putting some or all of that money toward your debt. No matter the amount it will help! If you win a small $5 bet with friends or find a five dollar bill on the street, why not use it toward paying off your student loan? Better yet, at the end of each year when you clean out your jar of coins you can cash those in for money to pay your student loan debt. You weren’t expecting that money, and your budget is already covering the other stuff.
Get your side hustle on. Part time work is easier to come by now more than ever thanks to the gig economy, and the advent of online marketplaces where you can offer your services. The opportunities are truly abundant if you’re willing to think outside the box.
Side Hustle Ideas
Do you have a car? Uber, Lyft and GrubHub are amazing options. Work when you want and for how long you want.
Are you the biggest animal lover you know? Rover and Wag are the on-demand dog walking/sitting service for you! Make money while hanging out with a dog (this is also great if you want a dog, but can’t afford one at the moment).
Are you a good writer? You could contribute content as a blogger to services like TextBroker.
Don’t rule out any of your quirky talents either. Do you enjoy knitting or soap making? You can sell those items online. Consider Etsy, eBay or Facebook Marketplace.
Are you good at things like website design, social media, online research or even translation? Maybe you’re a whiz with Excel, or just really handy? Sign-up to provide services through sites like Fiverr and Task Rabbit.
You Can Pay Off Your Student Loans Faster
As you can see, paying off student loans in less time is all about managing your cash flow and putting as much of it as you can toward your debt. Combine a few or all of these tips and see just how quickly your balance will drop when you make it a priority. Not only will you be out of debt ahead of schedule, but you’ll pay less in the long run. It’s a win-win!