Right now, Americans owe a total of around $1.78 trillion in student loan debt. That’s a lot of zeroes. Even for those with higher six-figure student loan debt, balancing paying off debt while managing daily living costs is challenging.
If you’re one of the many people who need to balance student loan payments with your monthly bills, there are ways to do so. Here’s everything you need to know about how to do it.
1. Make a Budget
It’s so important to start with a spending plan so you can tell exactly where your money is going. Budgeting for student loan payments and other expenses is key to avoid feeling overwhelmed or burdened with payments.
Begin by tracking expenses for a month or two. Most banks and credit unions have online tools that break the numbers down into categories such as housing and entertainment. Identify areas of greatest spending, print out bank statements, and look for ways to trim down within reason.
Then, set a monthly dollar amount for each spending category. Necessary expenses include;
- Housing
- Food
- Utilities
- Fuel and automotive maintenance
I recommend that you strive to stay within $25 of the projected expenditure for each requisite item. You can use an app like Simplifi to help you with budgeting because it’s helpful and gives you a clearer view of your total spending.
And then there are other flexible expenses, such as:
- Beauty expenses
- Dining out
- Vacations
- Entertainment expenses
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2. Pick a Payment Plan
Multiple avenues exist for paying student loan debt. While the basic student loan payment plan involves paying loans off within a decade, this isn’t practical for many new to the workforce. Enter income-based repayment plans.
Income-based repayment uses a sliding scale to determine how much in loans an individual can pay monthly. The cap depends on the total income of the borrower. Some of these plans offer payments as low as a few dollars per month, and after paying loans faithfully for a period of 20 years, remaining undergraduate loan balances become forgivable — 25 years for graduate loans.
3. Consolidate
Consolidating student loans can help people keep on track with repayment. Consolidating means paying only one monthly fee instead of a different amount for each semester enrolled. This helps prevent defaulting on loans accidentally overlooked.
One potential pitfall of consolidating: Doing so is a one-and-done proposition. This means getting stuck with the interest rate given at that time, even if rates later drop. However, many young adults find this risk tolerable in exchange for knowing exactly how much they must pay each month.
4. Create a Challenge
While no game truly makes repaying student loans the highlight of life, making paying debt down faster into a challenge can be rewarding. Establish a game that involves saving a little money each day to split between building an emergency fund and debt reduction.
Every day, transfer a dollar or more from checking to savings and watch how quickly the money adds up. Alternatively, consider rounding up the price of each purchase and putting that amount in savings. For example, those paying $5.20 for a beverage would transfer 80 cents to their savings account.
Related: Best 5 Money Challenges To Improve Your Finances
5. Increase Income
Earning more money means paying down debt faster, so consider taking on a side hustle to increase income. This need not entail asking customers if they want fries with their order. Technology allows those with entrepreneurial mindsets to capitalize on skills they’ve already honed.
Those who work in the accounting field can moonlight by doing bookkeeping for small businesses. Those with teaching experience can sign up for an online tutoring service or design courses for home-schooled children. Have strong writing skills? Consider establishing a blog, writing an e-book, or both.
A few other side hustles include;
- Delivering medical supplies and needs
- Freelance writing
- Mystery shopping
- Transcription
- Pet sit
- Deliver for Amazon
Related: Simple, Low-Effort Ways to Make Money
20 Ways to Make Extra Money Today
6. Get Help
Still struggling to make payments despite working more and spending less? Asking for aid doesn’t show weakness — it demonstrates financial savvy. Falling behind on loan payments can negatively affect your credit scores, resulting in you having to pay additional deposits and higher interest rates.
Missing student loan payments can also drop your credit rating considerably. Those with federal student loans can request a temporary hardship deferment or forbearance. Remember that they continue to accrue interest while in forbearance, resulting in paying more overall.Your student loan servicer may have other relief programs and options, but you must ask to learn about them.
Outright failure to pay student loan debt can have serious consequences. In some cases, it can result in difficulty finding or keeping employment, as some positions demand money management skills. Even those who manage to dodge the dreaded pink slip can find their wages garnished, leading to further financial woes.
Balancing Loans and Life
If you’re looking to manage both your student loans and bills, there are many different things that you can do. While student loans can take up serious budget space, by practicing financial discipline, you could balance paying down debt and managing the costs of living. And luckily, there are so many different things that you can do to pay those student loans down without feeling a massive pinch.
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