Let’s be real, life doesn’t always pan out the way you thought it would—and those of us in our late twenties and early thirties know this better than anyone. A fresh graduate from college with a degree may think that they’ll have an array of incredible opportunities lined up for them, just waiting to be seized, but that doesn’t always turn out to be the case. Check out how you can go through your student loan repayment.
Being an adult sometimes means settling for something average till your big break comes, and you dig yourself out of the hole. And while a stable income (even if it’s just average) and a nice apartment are things to be grateful for—considering the state of the U.S. economy in the wake of the coronavirus—sometimes, it can be challenging to make ends meet. Especially when it comes to paying off student loans.
Student loans can be cumbersome. According to Forbes, as of 2020, 45 million borrowers collectively owe more than $1.6 trillion in student loan debt. This makes it the second-highest consumer debt category.
But don’t worry, it’s not all too bleak. There are some solutions and measures, including student loan refinancing,to help you manage and pay off your loans more efficiently. Let’s take a look at some of them.
Start Budgeting To Make Smart Repayments
Creating and sticking to a budget may not give you the kind of lifestyle you wanted for yourself, but trust in the process, and it will get you the results.
The issue with making minimum monthly payments on debt is that most of it go toward interest, which does little to reduce what is owed. This is a primary reason why many borrowers wonder why there’s no significant drop in their debt even after making monthly payments for five years.
Creating a budget will help you make extra payments in addition to the monthly payments for debt elimination. As the balance drops, so will the monthly interest—causing a snowball effect that will reduce your burden far more quickly than you could’ve imagined.
Many people are surprised at how much minor or miscellaneous spending can add up –with budgeting, you can cut down on unnecessary expenses to make extra payments.
Utilize Raises for student loan repayment
If reducing monthly expenses seems too challenging a feat to accomplish, the next best thing is to find a way to utilize the additional income to pay off student loans.
If you get a raise at work or a bonus because you performed exceptionally well in the last quarter, don’t spend it on yourself. Even though you probably deserve to spoil yourself a little and take a break, you should save that money to repay your student loans.
Think of it as an investment—the sooner you’re done with debt, the sooner you can start spending those bonuses on yourself.
Don’t Keep Up With TheJoneses
Friends from college buying new cars, renting luxury apartments, and taking extended vacations may leave you feeling frustrated with all the savings you’ve been gathering to pay off your student loan. Still, you can’t let it rain down on your parade.
Don’t fall into the trap of comparing yourself with the Joneses or keeping up with the Kardashians. It’ll only shake your resolve and plunge you deeper into debt.
Consider things logically—a little sacrifice right now will do wonders for your financial standing in the future.
Look For Money-Making Opportunities to pay student loan
Having a limited income definitely puts a cap on how much you’re able to repay each month. But if you’ve got your eyes on a money-making opportunity, or the strength to take up a second job, we say go for it.
Pick up a side hustle that you can enjoy, so a full day’s work doesn’t drain you completely. Opt for jobs with flexible hours such as freelance writing, tutoring, babysitting, photography, or driving for Uber.
When you start making extra money, don’t inflate your lifestyle with it. Instead, try to put all of it toward your debt.
Consider Refinancing in repaying your student loan
Applying for a loan means agreeing to certain terms, even if you don’t like them – but the good news is that you don’t have to be stuck with them forever.
If you have a good credit score or stumbled upon a better borrowing opportunity, you can enjoy more favorable loan terms to make the repayment ordeal easier.
Loan refinancing allows you to change the terms of your original loan and replace it with more suitable ones. It gives you more freedom to choose between different lenders’ interest rates and loan repayment periods—allowing you to save moneywhile repaying your loans.
You may think variable interest ratesare a viable alternative because they offer competitively low rates, but their unpredictability can make it hard to plan your finances. You will have trouble setting fixed payments asidebased on the fluctuations in these interest rates.
With loan refinancing, that isn’t the case because they have a fixed rate—making it easy for you to stick to a budgeting plan and pay off the debt as soon as possible.
The Bottom Line
Battling a mountain of debt with an average income is a tough situation affecting millions of Americans. But a few smart financial decisions can make the process substantially easier.
The mere thought of repaying student loans can fill you with dread. Luckily, there’s a range of great tools and techniques that you can use to make the whole ordeal easier on the pockets—like these smart tips we’ve highlighted for you. Refinancing is the ideal solution for those who don’t want to lug around thousands of dollars in student loan debt on their shoulders all their lives.
So if you’re ready to do the same, start by comparing rates and work with a well-reputed and experienced lender such as Education Loan Finance (ELFI) to pay off your student debt while enjoying some peace of mind and saving money.
Learn more about ELFI’s loan refinancing options here.
About The Author
The writer of this piece is a financial advisor working specifically with clients looking to manage student debt. Their expertise is part education, part experience. Simplifying finance for the overwhelmed is a passion they hold dear.