According to Student Loan Hero, the U.S. has a combined total of $1.56 trillion of student loan debt spread across 44.7 million Americans and the average monthly student loan payment is $393.
Are you part of those statistics?
Society makes college seem almost mandatory. I know I felt that pressure when entering my senior year of high school. Everyone asking where you were going to school the next year, no one ever asking if you could afford it.
Student loans were just there, almost everyone you know had them so they can’t be that bad. You didn’t think twice about them. You just filled out the necessary information and boom, you could “afford” college.
These loans are treated like a right rather than a privilege and I think most people would agree when I say they have seriously been taken advantage of.
No, I am by no means on the side of the mega corporations issuing these loans. However, I believe that as a society, we need to change the way we think about student loan debt.
The cost of tuition is only rising and everyone deserves an equal chance for education however I believe there needs to be some sort of class or test mandated prior to issuing any loans.
This would help students understand their options and exactly how these loans will effect them. I also think the price of college needs to drastically decrease but that’s a whole other story…
Anyways, back to the question. Are you drowning in student loans? Below is my outline for eradicating student loans from your life.
Acknowledge
If you are reading this article, then you are acknowledging the fact that you have student loans and you are ready to take them seriously. Don’t feel guilty – this kind of debt is a one time sort of deal (assuming only undergraduate) and it is helping you to become more educated in a subject matter while increasing your income potential.
Many just continue to pay the minimum amount due every month and end up paying THOUSANDS more in the long run rather than if they put in the extra effort towards figuring out a way to get rid of this debt. But, you are ready to pay off this debt and increase your net worth!
Now that you see and understand this liability, you can work towards paying it down as quickly as you would like. We will walk through more strategies on how to pay it down below.
Create A Goal
Once you have acknowledged your debt, you need to brainstorm a realistic goal for paying it off. When I say realistic, I mean something in the middle. Don’t give yourself way too short of a time span where you won’t be able to pay all of your other bills but on the same note, don’t say you’ll pay them off in a span of ten years because then you are committing to paying boat loads of extra money in interest.
Set a realistic goal and stick to it. Write it down and put it places where you will see it every day, multiple times a day. Use this goal as your motivation to crush this debt quicker, and be sure to break up your goal into smaller chunks.
For example, if you have $100,000 in student loans and you want to pay it off in 3 years you can break that up into an individual year, month, week and/or day goals.
- Yearly: $100,000/3 years = $33,333.34 paid towards student loans each year
- Monthly: $100,000/36 months = $2,777.78 paid towards student loans each month
- Weekly: $100,000/156 weeks = $641.03 paid towards student loans each week
- Daily: $100,000/1095 days = $91.33 paid towards student loans each week
Setting a goal will help you stay motivated and get rid of your debt.
Refinance
Even if you think you have a good interest rate, you should still look into refinancing. The sooner you refinance, the better.
One of the best perks of refinancing is that you can refinance as many times as you want. So why not refinance until you can get the lowest interest rate possible?
Another great perk of refinancing student loan debt is that it doesn’t cost you a dime. That’s right. A lot of people confuse it with mortgage refinancing which does cost money. With no cost for refinancing your student loans, it really is a no-brainer.
When you are shopping around for the lowest rate, your credit won’t be affected. However, refinancing slightly impacts your credit once you actually go through with it but it seriously isn’t anything major and it is only on your report for a year. If you are a travel hacker like me, you understand that credit score fluctuations are the name of the game and are used to seeing 5-10 point swings.
Make sure when refinancing you are prioritizing a low interest rate over payback time frame extension. The latter may seem appealing since it will decrease your monthly payment amount however you aren’t saving money in the long run. Go with the lowest interest rate you can find and work on crushing this debt!
The only case when you shouldn’t refinance is if you are going for any sort of loan forgiveness. Weigh out the pros and cons and see if loan forgiveness is really the best option for you before making this decision.
Where To Refinance
First, I would use SoFi. Their platform is incredibly easy to use and they have great customer service. By using this SoFi link, you will receive a $100 bonus just for signing up!
SoFi also has something that I had not even heard of until reading this article by Financial Panther… SoFi Events.
SoFi hosts events in major cities across the U.S. These events could be dinners to happy hours and so much more. The best part, once you refinance with them, you’re in for life! You can go to any of these events even after your loans are paid off. Free dinners and drinks for life seems like a pretty stellar deal if you ask me.
Second, I would utilize Credible. Credible allows you to compare interest rates across an array of companies to see which one is offering the lowest interest rate. In fact, I would use credible for a second, third and potentially even fourth time to see how low you can get your interest rate.
Refinancing is major when it comes to paying back your student loans. You will end up paying far less the lower you can get your interest rate.
Sacrifice
Once you have acknowledge your debt, you need to think about how long you really want to be paying it for. 2 years? 5 years? 10 years? Longer?
If you are like most, this kind of non-income generating debt is scary and you want to pay it down as quickly as possible. This requires you to seriously take a look at your monthly expenses and to see where you can cut down.
Can you bike to work instead of driving your car? Can you save a couple hundred by not going out to the bars every weekend? Could you maybe skip a couple concerts and put that extra money towards loan pay down?
I get it. This sounds crappy. But you will thank yourself in the long run by throwing any extra income towards your debt. Evaluate where you can make sacrifices and actually stick with them.
Fight life style inflation as much as possible. Don’t go out looking for more debt to acquire. Use your time and money wisely. Put the money towards debt and put your time towards creating more streams of income.
For more information on minimizing your expenses, check out these articles:
- How to Never Pay Rent Again
- 11 Easy Hacks to Save Money
- 6 Ways to Cut Your Cable Bill
- How to Avoid Lifestyle Inflation & Track Your Net Worth
Side Hustle
Once you have refinanced your loans and cut back on your monthly expenses, it is time to look at how you can bring in more income to put towards this debt.
Side hustling can be used however you would like. Maybe you have a hobby that you want to monetize. Maybe you have been dying to try to learn a new trade. You can even use it as a form of expression. Whatever you decide, try to keep the goal of creating another stream of income in mind.
Some really easy side hustles you can start today include renting your car on Turo, renting out a room on Airbnb (or if you are really motivated then maybe try Airbnb Arbitrage), freelancing a skill that you already have, driving for Uber or Lyft. You could even start a blog and write about something you want to learn more about or have a passion for!
For more information on potential side hustles, check out these articles:
BONUS
Student Loan Hero is a great resource when it comes to tackling your student loan debt. It has calculators that help you assess the financial impacts of prepayments, refinancing, consolidation, and so many more. Check them out!
Final Thoughts
It may seem like a lot of work. Between refinancing, sacrificing and side hustling, your days will be pretty full. But paying off this debt will really help your financial well-being in the long run. You already are done with the first step of acknowledging, why stop there? If you are ready to crush your student loan debt, let me know in the comments!
