Post-grads have enough to worry about, like starting a career, finding free time, and surviving in general. But student debt is the biggest and most common worry among post-graduates. However, your student debt doesn’t have to haunt you for decades to come. By taking the proper steps, you can pay off your student debt quicker than you’d think (without selling an organ or working four jobs).
1. Make a budget. Then stick to it.
Educate yourself as much as you can about your options and make a plan that works best for you. If you can afford to pay the highest payment every month, you should. The more you pay each month, the sooner your debt will be gone. If you’re still in school, you can pay off the interest first, it won’t be added to your balance and increase what you owe. You can reach out to your loan provider and check what the balance would be and how much interest has accrued. More information on interests and budgeting can be found on your loan provider’s website or at your school’s financial aid office.
Budgeting is crucial to ensure you’re able to make your routine payments while being able to live your everyday life. So, you should set aside a portion of every paycheck to go towards your debt. This will depend on your situation, but it is important to prioritize and understand that saving as much money as you can contribute to paying off your debt sooner rather than later.
One popular budgeting technique is the 50/20/30 method. This requires you to divide your paycheck three ways; 50 percent of it goes to essential expenses, such as food, rent, gas and bills. Twenty percent should go to your debt while the remaining 30 is spending money.
If the 50/20/30 method isn’t right for you and you need more wiggle room with your paycheck, most banks recommend putting at least 10 percent of your paycheck towards your debt, but no more than 30 percent.
2. Find ways to save money where you can.
No, a coupon for $2 off dry shampoo will not help pay off your loans by next week, but even the smallest actions can help save money. This can include in-store coupons, Chrome extensions that find and apply online codes for you (such as Honey), having water instead of a cocktail, limiting yourself to one streaming service, cooking at home (which can save an average of $16 per meal) and more.
“I save money by thrifting instead of shopping in the mall when I need new clothes for work,” says Rachel Smith, a recent Framingham State University graduate. “I go on 50 percent off days to save even more!” she says.
You can also save money by getting rid of things you pay for that you don’t need. Keep logging into Netflix and haven’t turned on your TV in months? Cut the cord and you can save up to $100 a month.
3. Make extra payments when you can.
Got a bonus or raise? Picked up a few extra shifts at work? Able to save more than you thought? Make an extra payment! Paying a little more every now and then means smaller or fewer payments to make later on. Extra payments are applied to the principal amount you owe, which can decrease your interest; meaning you are paying less later on. Just make sure you contact your lender so they know you are making additional payments and not paying for the next month’s bill.
You can also make a lump-sum payment which will pay off your debt faster and help you save money from the interest. For example, say you have a $30,000 loan with 5 percent interest and make monthly payments of $300. If you make a lump-sum payment of $500, you’ll be paying off your debt 3 months early and saving over $350 dollars.
4. Find small ways to make a little more money online.
One way is to turn a hobby into profit. There are a variety of ways people can support artists online now. Love to craft or make art? Sell your creations online to make a small profit! Submit articles to websites for a fair price. You can even turn the things you enjoy into part-time or full-time jobs, like dog walking and child care. Side hustles are not only enjoyable, but the money goes towards paying off the loans faster.
Sell things you don’t need or want anymore, as well. Clean out your closet and make some extra cash by selling clothes, shoes, or jewelry (in good condition) on apps or websites. Old, expensive textbooks you’re never going to use again taking up space on the shelves? Sell them to people that do. The profits you make can go to paying off your student debt faster than you thought!
The views of the author of this article do not necessarily represent the views of Gradifi. We make no claims, promises or guarantees about the accuracy, completeness, or adequacy of the information contained here. Readers should consult their own attorneys or other tax or financial advisors to understand the tax, financial and legal consequences of any strategies mentioned in this article.