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Have you gone to college in hopes of bettering your future, racking up thousands of student loan debt, but you haven’t exactly landed that dream job?
Yep, welcome to my world, and the world of 44 million other borrowers who owe more than $1.4 trillion in student loan debt.
To say the least, it sucks to have a huge chunk of your income going towards something you had hoped would increase it, but luckily there are ways to help pay off your student loans when your money is a little funny.
Refinance your loans
Refinancing your student loans is one of the best ways to decrease your payments and pay off your debt quicker. Of course, you’ll want to ensure that your interest rate will be lower than the original rate in order to reduce paying more over the life of the loan.
Basically, refinancing is when you get a new loan to pay off your existing loans with the previous lender. Instead of keeping up with multiple payments, they are all consolidated into one.
If you’re interested in refinancing, I highly recommend using SoFi. SoFi is the leading student loan refinancing provider in the entire US, and those who refinance with them save an average of $288 a month—which is huge!
In addition to saving on your student loan payment, you’ll have access to additional perks like their career strategy services. It only takes two minutes to see how much you could be saving.
Be advised that this option is only available through private lenders which means you may lose the benefit of applying for programs such as an income-driven repayment plan or loan forgiveness.
Use large chunks of money
Many people receive a large sum of money at least once a year in the form of a tax refund, lawsuit settlement, etc. Instead of living la vida loca, consider using a portion of those funds as a loan payment to help get you ahead of the game.
Back in my college days, I would take a percentage of my student refund check and apply it to the lowest loan balance. By doing this I actually managed to pay off one of my loans before I even graduated.
Comb through your budget and trim the fat
There’s no easier way to find extra money than by combing through your budget to determine where you can make cuts and adjustments. Even if you feel as though there’s no more wiggle room, chances are there’s something that can be adjusted.
Related reading: Budgeting for Beginners
Negotiate lower payments with service providers and determine which plans you can downgrade or get rid of completely. I saved around $60 just by switching from an unlimited data cell phone plan to a prepaid plan. Honestly, I can’t even tell the difference.
Take the extra money that you find and use it to help pay down your loans.
Find a side hustle
A side hustle provides you with an additional source of income. This can be anything from your typical part-time job to a hobby that you have monetized.
Sell old/unwanted items. Instead of letting old and unwanted items sit around hogging up space, turn them into a profit. Host a yard/garage sale from time to time or put your items up for sale online. ThredUp is the largest online consignment sale that allows you to turn your old wardrobe into cash.
Get paid to take surveys during your spare time. Did you know that you can get paid to surf the web and watch videos?
Sites, such as Swagbucks, allow you to earn free gift cards and cash by simply completing a few small tasks.
Offer your services for a fee: When you’ve got a gift then add tax.
I’ve always enjoyed writing and others would often ask me to help them write and edit their papers. Once I realized I could make a profit from these ‘favors’, I began charging a small fee for proofreading and editing. I even went on to work as a freelance academic writer for about a year making roughly $10 a page.
There’s a side hustle out there that works for you and your schedule, you just have to find it.
Use repayment programs only when necessary
Repayment programs, such as the Income-Driven Repayment Plan or the Pay as You Earn Repayment Plan, can lengthen the amount of time it will take you to pay off your student loan debt. This causes you to pay out more in interest, thus losing more money.
Of course, not everyone can afford the standard payment so take advantage of these programs when you really need them. I’ve been on the Income-Driven Repayment Plan up until this year and there’s no shame over this way.
If you can afford to be without these programs then try to stay away from the apply button. When you’re only making a $5 payment on a $20,000 loan can you imagine just how long it’s going to take you to get to a $0 balance? Hello grandma…
Take advantage of automatic enrollment interest reductions
Some lenders may offer an interest rate reduction to those who sign up to have their loan payments automatically deducted from their bank accounts.
Give up your raise
OK, so you’re not really giving up your raise, but in a sense you are.
Calculate how much more you are making after your raise and use that amount to throw towards your loans. You’ve made it to this far without that extra money so you can survive a while longer.
If you’re really hurting for cash just use the extra money as part of your minimum payment but ideally, this will need to be used as an additional payment. Making extra payments helps to reduce the amount of interest paid on your loans thus helping you pay them off quicker.
The quicker you get out of student loan debt, the quicker you can get back to enjoying those extra funds.
Use credit card rewards
If you’re a responsible credit card user, cashback rewards are great for helping to pay off your student loans. This requires no extra work on your end, just simply use your credit card to make the purchases you were going to anyway and get cash back.
Related reading: How to Pay Off Debt Using a Credit Card
Some cards offer a specific amount of cash back if you meet the spending requirements within a certain amount of time. For example, spending $3000 within three months of opening your account may give you $1000 in cashback rewards.
Paying your bills using your credit card and then paying off the amount from your regular bank account helps to maximize the rewards. You’ll meet the spending requirements and be able to use that extra money as part of your student loan payments.
Now, this option is definitely not for those who have a hard time resisting temptation because you’ll wind up in a bigger mess than you originally started in. Jake over at IHeartBudgets explains how he used credit card rewards to pay off $1100 worth of student loan debt by meeting the minimum spending requirements.
Credit cards that I own with cashback rewards and 0% Intro APRs
Discover: You can earn 5% cashback on rotating quarterly categories, and 1% cashback on all other purchases.
Get a $50 Cashback Bonus or 5,000 Miles when you make your first purchase within three months through this link.
American Express: You can earn 3% cashback at supermarkets, 2% cashback at U.S. gas stations & select U.S. department stores, and 1% cashback on all other purchases.
Get $200 back after you spend $1,000 in purchases within the first 3 months.
Go with the snowball or the avalanche
When paying off debt, the snowball method is when you start with the lowest debt balance first and then work your way up. Paying off debt is hard and at times the stagnancy can make you feel like you’re getting nowhere fast.
Targeting your smallest balance first helps to build momentum and gives you that extra boost of confidence to continue paying off your debt. When that balance is paid in full you have that extra income to use towards the next small balance.
Avalanching your debt is when you tackle the balance with the highest interest rate first. Although this method may make you feel as though you are moving at a snail’s pace (instant gratification millennials beware), it does help to cut down the amount you pay in interest thus getting you out of debt quicker.
When doing my research about student loans I came across this free program and decided to check it out. Upromise allows members to earn cashback by shopping online, booking hotels, eating out at participating restaurants, and using eCoupons.
Your earnings can be used towards eligible student loans or can be deposited into a Upromise Goalsaver account. If you have a 529 Plan you can also contribute those funds to that account or just simply have a check sent to you.
It seems as though millennials, myself included, are up to their eyeballs in student loan debt without any hope of getting out soon. Despite how we all may feel, your loans do not have to be a death sentence in regards to your financial situation.
Creating a specific plan-of-action and making a few adjustments can help you chip away at those balances and put you on the path to becoming student loan free.