3 Simple Ways to Pay Off Your Student Loan
There is a plethora of information about paying off student loans. One of my favorite sites is Student Loan Hero. So I thought I'd pass on three of my favorite and simplest tips Andy suggests.
Consolidate and refinance
According to Andy, refinancing your loans is one of the best moves out there for paying off student loans faster. Refinancing decreases your interest rates. That means more of your payments go towards paying down your student loans.
When you refinance your student loans, you’ll get one consolidated loan with one monthly payment. Tip: Just include loans where you can actually decrease your interest rate.
For example, student loan refinancing rates below 3% are currently available which is a great deal if you're paying 8% like me. For current rates, see Andy's post on student loan refinancing rates.
Apply your raises
Hopefully you have a job, and if you do, hopefully you get regular, incremental raises. Avoid getting more stuff when you get a raise — a bigger TV, a better car, or more exotic vacations. Put a chunk of it (or all of it) toward student loans.
Andy covers this in his post on how to start investing, but the same strategy could be used with student loans. He suggests taking 50% of your raise amount and add it straight toward student loan payments. If you don't use the other 50% to pay off other debt or into a savings account, then my suggestion?...put 100% toward student loan pay off. The reason? The satisfaction of a bigger TV or newer car will only last for a short time, but the satisfaction of being debt free lasts a lifetime.
Trim your budget
If you want to find more money but can’t easily increase your income, decreasing your budget is an option. You may want to do a short-term "extreme budget" trim or do a longer term less drastic trim. Either way, you only have to do this short-term. It’s not for the rest of your life, but rather a short period where you’re focused on paying off student loans faster.
I love Andy's example in which, Stephanie paid off $35,000 in debt in three years by moving to a cheaper apartment, skipping happy hours or meals out, and earning more side income.
A few common options are:
- Cancel cable TV
- Don’t go out to restaurants
- Give up alcohol
- Work extra hours or take on side work
There are tons of options and you can also find great ways to trim your budget at WomensMoney.org
Personally, I'm going to try the "game" he suggests: have a “no spend month” where you don’t buy any new stuff all month and put the money toward student loans instead.