College and university are some of the best years of your life. Responsibilities are at a minimum – attend class and do your homework and you’ll be just fine. However, the end of higher education and the process of entering into the real world catches up to all of us at one point or another. When the glorious college days end, most students have to find a job, settle down and figure out a way to repay the thousands and thousands of dollars they borrowed in order to finance their diploma.
Student debt is one of the hardest struggles of the 21st century.
While getting a diploma costs a fortune, it’s definitely necessary. Georgetown Center on Education and the Workforce estimates that by 2020, 65% of all jobs in the USA will require a diploma higher than a GED. As of now, roughly 33% of the population has a Bachelor’s Degree or higher and the total debt for student loans is already at a staggering $1.52 trillion. If we can’t figure out a way to pay it off faster, we’ll be dealing with a real crisis in no time.
Fortunately, there are many actions you can take towards reducing your own student loans debt faster. We’re going to cover 7 budgeting tips so you can pay off your loans in fewer years without having to compromise on the quality of your life.
1 – Give More than the Minimum
One of the most overlooked aspects of paying back any type of debt is the amount of money given per repayment. Whether it’s a student loan, a personal loan or even credit cards, you should always give more than the minimum payment.
In fact, depending on your interest rate, the minimum payment might actually set you back further into debt as time goes on. This is often the case with credit card debt, where the interest rate can get as high as 20% and more.
Rather than giving the minimum amount required, you should try to double it. Not only will this help reduce the amount of time you need to repay the loan, but it’s also a great way to increase your credit score. If you can’t double the minimum payment, you should still try to give as much as possible without compromising on your daily life (make sure you can still put food on your table).
2 – Get a Side Income
So you’ve just graduated from college and you now have a great job. That doesn’t mean you have to focus 100% of your energy towards that sole employment. Internet jobs are thriving and estimates show over 45% of the population working from home full-time or part-time.
UpWork allow you to create a profile that acts as a sort of resume where you can list diplomas, work experience and you can even take tests on their platform to prove your knowledge. You can apply to all sorts of jobs through their platform and many world-class brands use this platform, making it a great way to find small and large jobs alike. If you’ve got a few extra hours every week, getting an online job is a great way to create additional income so you can pay off more of your student debt faster.
3 – Consolidate Your Debt
Debt consolidation sounds scary, but it’s actually a very reasonable way to facilitate the process of repaying loans. If you have numerous loans from many different lenders, keeping track of all the payments and payment dates can quickly become overwhelming.
Consolidating your debt essentially regroups all of your loans into a single loan. You’ll need to be approved for the new loan though, so this option is only available if you have a stable income and decent credit.
Once you’ve consolidated your debt, you will only have one monthly payment to make. While you won’t be able to reduce your debt this way, it definitely makes it easier for you to keep track of your repayment schedule and thus helps you avoid missed payments. Consolidating your debt is also a huge stress reliever.
4 – Verify Eligibility for the Loan Forgiveness Program
Depending on your job, you may be eligible for the Public Service Loan Forgiveness Program. This government program allows you to drop all of your remaining student loan balance after making 120 qualifying loan repayments when working for qualifying employers. In order to be eligible, you must work either for the government or for a not-for-profit organization.
This program is not very well advertised, so most people have no clue of its existence. However, it can be a simple way to get rid of the remaining balance of your student loans if you are eligible.
*Another excellent resource is Lendedu’s Public Service Loan Forgiveness Guide
5 – Create a Budget and Stick to it
It may seem like a given, but making a budget and sticking to it is one of the best ways to pay off your student debt faster. It’s one of the only ways that you’ll actually be able to put money aside every week without getting another job.
The first step to take is open up an Excel file and start writing down all of your income and expenses on a weekly basis. If you’re not good with Excel, you can find tons of budget templates online for free. There are even some great budgeting apps and software tools available.
Once you’ve written down all of your income and expenses per week, you’ll have a clear view of your weekly overages. Keep some of that extra money to pay off your student loan – you could even set up an automatic bank transfer so it leaves your account on a timed basis every week before you get around to spending it.
6 – Extend Your Loan’s Duration
When you first signed up for your student loan, you were initially enrolled in the standard repayment plan, which consists of repaying the loan over a period of 10 years. However, student loans can be extended for as much as 25 years. While this won’t allow you to pay off your loan faster, it will definitely make your payments smaller.
With smaller monthly payments, you’ll be able to set more money aside every month. This means you may actually be able to give lump sum payments on a more regular basis. The only downside is you will end up paying more interest than if you were to pay off the loan in 10 years.
7 – Explore Various Repayment Options
It’s worth taking the time to call your student loan provider in order to explore various repayment options. This is one of the most flexible loans available, allowing you to repay according to your income and adapt as you go.
Unemployed individuals can actually end up bringing the loan payments all the way down to $0 until they get a job. Other options include reducing the amount you pay on a monthly basis according to your current income. Student loans are very forgiving – you just need to take the time to make a call or sit down with your loan representative.