If you’re a millennial and spending one-fifth of your income on your student loans, you’re not alone: an estimated 60 percent of your peers are doing the exact same thing. The sad truth is that without a smart budgeting strategy, you could be paying off your loans into your 40s. If budgeting sounds as appealing as doing a digital detox, then paying off your college bill could be akin to using a ’90s flip phone, a frustrating and slow process.
Here are eight tips from the experts at Suffolk Federal on how to set up a budget so you can pay off your student loans quickly—without the frustration.
- Pay more now, benefit later. Just like with a credit card, it’s always best to pay more than the minimum payment—even if it’s only an extra $20. And if your finances allow, try to pay every two weeks rather than once month; this will lower your overall debt faster. Plus, the amount you pay in interest will go down too.
- If you’ve taken out a few different loans, there are certain ones you should pay first. For instance, if you took out a variable private loan, this should be first on your list to pay off. Although the interest rate will probably be lower than a loan you may have with a fixed rate, waiting too long can result in your variable interest rate going up—your fixed rate loan isn’t going anywhere.
- Sign up for automatic payments. Not only do they ensure that you’ll at least make your minimum payment, but there’s an additional perk: All government and some private lenders will charge you a lower interest rate (about 0.25 percent less) when you pay your loan off via automatic payment.
- Earn money on the side. Sure, working a full-time job while working on the side and still trying to have a social life can be difficult, but remember: Your student debt does not have to be forever. By making the choice to work on the side (temporarily), you can put that extra money toward paying off your debt. Consider jobs such as freelancing, waitressing, turning your apartment into an Airbnb or driving for a service such as Lyft or Uber.
- Pinch pennies. If you think of your student debt as a short-term problem (and you should), cut back on those amenities for the time being. Consider these alternatives:
- Gym memberships: Cancel them. Work out at home or outdoors instead.
- Books: Check them out from the library rather than buying.
- Food: Prepare meals at home rather than eating out.
- Cable: Cancel it, and use cheaper memberships such as Netflix or Hulu.
- Talk to your employer. Salary not up to snuff? Many midsize companies can’t afford to pay their employees a salary that’s comparable to a large corporation, but they may be willing to make a payment toward your loan. If you’re a recent grad looking for a job, this is something to discuss when negotiating your salary. Be happy with a lower salary and to commit to a specific time that you’ll stay at the job in exchange for them paying off your student loans.
- Refinance. With a strong credit score and good financial/educational background, lenders may give you a new loan with a lower interest rate, so you can save money in the long run.
- Take advantage of deductions. While there are several requirements that must be met, you may be eligible for a student loan interest deduction on your federal taxes. In fact, if you do qualify, you could deduct up to $2,500 each year for the interest you pay on your loans.