Many Millennials have had a tough start to their adult lives after college. The job market has been rough and starting salaries are down. To top it all off, those in their 20s and 30s are dealing with a crushing amount of student loan debt.
In order to solve our student loan debt crisis, we must take action and start working today to reduce our overall debt burden.
Easier said than done right? Undoubtedly working to pay off debt is hard. But it is possible, and having the right knowledge on your side makes it just a little bit easier.
Prioritizing Your Student Loans
Many Millennials with student loans carry debt from more than one source. If you have various loans with different balances, how do you know which one to focus on first?
Mathematically, the answer is not the loan with the biggest balance. The interest rates on your loans are what cost you money each month, not the principle amounts. If you want to get rid of debt in the most efficient way possible, consider paying off the loan with the highest interest rate first.
Next on your priority list is considering whether your loans are federal student loans or private student loans. Work on eliminating the private loans first; you have more options for repayment with the federal loans thanks to some helpful programs for which you might qualify.
Making Use of Help Available to You
Once you understand which debts you need to focus on first, you might want to do some research and learn about programs that may help you with your student loan debt burden.
There are several federal student loan repayment programs available. Here’s a quick rundown of these and what you need to potentially qualify for them:
Standard Repayment Plan: This provides you with a way to pay off your loans a bit faster — and therefore you’ll pay less interest over time, which can save you money.
Extended Repayment Plan: As the name implies, this plan allows you to repay your loans over an extended period of time. Your monthly payments will be smaller, but you will end up paying more in interest.
Public Service Loan Forgiveness: If you work full-time in a public service job, you may qualify for this program.
Income-Based Repayment Plan: This program is for those who have high student loan debt burdens in relation in their income. It can help reduce the amount you must pay on a monthly basis.
Pay As You Earn Plan: Another program designed for those who have high debts and low incomes, but specifically designed for students who are just entering the job market. If you can’t qualify for this program, the Income-Based Repayment plan may be a better fit for you.
Income-Contingent Repayment Plan: This program may be able to help those who were unable to qualify for either the Income-Based Repayment Plan or the Pay As You Earn Plan.
Keeping Other Expenses Low — While Earning More Money
How much faster would you be able to pay off your debt if you didn’t have to spend so much on other monthly bills? Would you be on the fast-track to debt freedom if you only earned more money each month?
Don’t sit around and dream about it. You can both take steps to reduce your other expenses and take action to earn extra money to help you pay off your student loan debt faster.
Let’s look at some ways to keep your expenses low first, as cutting back on your costs is usually the easiest and fastest way to free up some of your cash:
Ditch the expensive gym membership and workout at home or outdoors instead. If you feel like you can’t live without all that equipment, consider it a temporary solution until your student loans are repaid.
Make similar switches with other services. If you’re paying for a monthly service that comes with a cheaper alternative, drop down to the least expensive option or go without completely while you’re focused on debt repayment.
For services you can’t drop — think car insurance — call up your providers and ask for discounts, a change in your plan, or any options you may have for making monthly payments lower.
Learn to be frugal. Nope, it doesn’t mean cheap; frugal means you’re less wasteful and more resourceful. It also implies that you can be happier with less stuff. (Haven’t you heard? Stuff is out and minimalism is in.)
Move to a cheaper location, find a roommate, or rent out your basement. Do whatever it takes to make your living situation less expensive.
Now, for the more exciting part: making more money. Yes, it is possible to increase your monthly earnings — but you must be willing to work for it. Keep yourself motivated by thinking about how much faster you could ditch the student loan debt if you had a few extra hundred bucks to throw at it each month.
Negotiate for a raise at your current job. This one’s not for everyone; you need to have actually earned the right to ask for a pay increase. You can always start working towards a raise in a few months, however. Offer to take on more responsibilities, take more ownership of the work you’re already handling, and brainstorm ways you can offer increased value to your employer.
Sell your stuff. Sure, this is a one-time fix, but if you have a lot of items that you no longer want or use but they’re still in good condition, head to eBay or Craigslist and kill two birds with one stone. You’ll declutter your own space and make a few bucks at the same time.
Start up your own side hustle. A side hustle is another name for a part-time job or gig you do on the side of your full-time job. Think about what you love to do, what you’re good at, and what people would be willing to pay you for. Then, get out there and hustle.
Combining your efforts to both reduce your current expenses and increase your current income is a powerful solution to your student loan debt problem. Yes, debt repayment is a difficult road to walk. But the sooner you start actively managing your student loans, the sooner you’ll be debt free and on your way to greater financial stability and success.