If you’re paying down student loans, you’re not alone. More than 40 million people are juggling an estimated $1.5 trillion in outstanding student loan debt. Among members of the class of 2017 who borrowed to attend college, student loan debt averages nearly $40,000. While it’s certainly a significant amount of debt, there are ways to relieve the burden and pay off student loans faster.
In most cases, it’s difficult to walk away from student loan debt so it’s vital formulate a plan to attack the debt. Thankfully, there are options, including government programs you can explore to ease your burden when you are struggling with paying off student loan debt.
If you’re looking for programs to help pay off student loans, or simply want to pay off student loans faster, here are some options to consider.
Income-Driven Repayment Programs
To stem the tide of delinquencies, the government offers numerous repayment programs that tie your monthly payment to what you earn – usually 10 or 15 percent of your discretionary income. If you’re not earning anything, you don’t have to pay anything.
The problem with these government income-driven repayment programs is that they reduce your monthly payments by stretching them out over many years. That means you’ll end up paying a lot more interest. Public Service Student Loan Forgiveness (PSLF) can often work the same way, so it’s important to do the math to see if it makes sense for your situation.
Nevertheless, income-driven repayment programs are often the best option for people who are struggling to make their monthly payments. At the end of 2015, the Department of Education had enrolled more than 4.5 million borrowers in one of these plans.
There is a danger to be aware of when you are considering income-driven repayment programs. The programs are so popular, and people with student loan debt are often so desperate, that scammers spring up left and right, charging people to help them enroll.
The government’s student loan repayment programs are free, and easy to enroll in. Never let student loan debt relief companies charge you money.
Refinancing Your Loans at a Lower Interest Rate
If making your monthly student loan payments is straining your personal finances, there’s another option that could save you thousands of dollars. It’s an option that many overlook: refinancing your loans with a private lender at a lower interest rate.
If you refinance your federal student loans with a private lender, you’ll lose some of the borrower benefits that come with government loans – like access to income-driven repayment plans and loan forgiveness. But for many people, the opportunity to pay off student loans faster is more than worth the trade-off.
*SoFi has launched a Rate Snooze offering for refinancing student loans. Frugal Rules readers who have federal student loans can lock in low rates but also keep their federal benefits – 0% interest until September 20,2021 – and pay nothing until October!
There are numerous private lenders that will refinance student loans and the rates they offer are often considerably lower than rates on federal loans. This is especially the case if you have an older federal PLUS loan taken out to attend graduate school, which can exceed 8 percent.
Unfortunately, the only way to lower the interest rate on your student loans is by refinancing them with a private lender. Although the Department of Education will let you consolidate multiple loans into a single loan to simplify your loan payments, you’ll still pay a weighted average of the interest rates on your old loans.
Private lenders offer many different loans at different rates and terms, so you’ll want to shop around.
Credible is one good option to do this as they allow you to compare up to seven lenders and get a variable rate as low as 1.04 percent or 3.34 percent if you choose a fixed loan.
The average borrower saves almost $19,000 by refinancing through Credible and you can get your rates within two minutes. Plus, checking rates does not impact your credit score.
Private Lender Options For Lowering Student Loan Debt
When you refinance with a private lender, you can take several different approaches. One is to reduce your loan term. That, along with a lower rate, will reduce the total interest you pay over the life of the loan.
If you’re more interested in lowering your monthly payment, you can refinance into a private loan at a lower interest rate that also extends your loan term. Since you’ll be making payments for a longer period of time, those taking this approach will end up paying a little more in total interest over the long run.
While you will pay more in the long run to lower your monthly payment, it will still be significantly less that what you’d pay without a refinance – as is the case in one of the government’s repayment programs.
*Related: Looking for money saving options? Check out our guide on ways to save money in college and still have fun.*
Refinancing your debt to pay off student loans faster may not work for everyone, but it is worth researching to see how much money you can save.
Pay Off Student loans Faster By Making Extra money
Refinancing, consolidating, or finding programs to help pay off student loans is great but they may not be enough to help you pay off your loans as fast as possible. The best way to pay off student loans faster, or any debt for that matter, is to make extra money. Here are 20+ ways to make extra money to pay off debt.
Making extra money is powerful because you have unlimited potential. With student loan debt to pay off, you can devote specific streams of income directly to your student loans.
If your first job does not pay enough to help you make progress on student loan repayment, it’s best to look for side hustles you can do in your free time to make extra money.
Here are some ways to make money to pay off student loans faster:
- Deliver meals with Uber Eats. If you’re at least 19 years old, have a government-issued ID (or valid driver’s license for a car), have access to a car, bike, or scooter, and pass a background check, you can set your own schedule. This is a great side hustle that’s flexible and lets you make good money.
- Make money grocery shopping with Ibotta. Ibotta offers rebates to hundreds of stores, including most grocery stores, and they give out random bonuses for using their app, letting you save money each time you shop. They also pay a $20 bonus when you sign up to use their service.
- Drive for Lyft. The ridesharing industry is a great way to make extra money to pay off student loans. If you’re at least 21 years old, have a valid driver’s license, have a newer car, and can pass a background check you can drive for Lyft. They’re currently offering a $1,000 earnings guarantee in your first 30 days. You just need 125 rides in the first 30 days to reach the guarantee.
- Teach international students through VIPKid. Assuming you already have a bachelor’s degree, the only other requirement is that you have one year of teaching experience – this can also include things like experience as a tutor or working with students. You can make $20+ per hour teaching students with VIPKid. They handle all the course materials. All you need is a laptop and availability.
There are many other ways to make money to pay off student loans faster. Find something you like to do and use the funds to knock down your student loan debt.
Track Your Spending
Regardless of the type of debt you have, tracking your spending is one of the best ways to identify savings to apply toward your debt. It can be easy to rack up expenses when you first graduate college. You likely have moving costs, you may be spending more for a place to live and more. It may also be the first time you have a decent paying job and it becomes easy to justify added expenses.
This is where tracking your spending becomes important. It may sound difficult, but it’s actually quite easy. Tracking your spending simply involves writing down everything you spend. This makes it possible for you to see where every dollar you make goes and gives you the power to make changes as you find needless expenses.
Tracking my spending was the key tool I used to pay off $50,000 in debt and was a life-changer for me. I used Excel to write down every cent I spent. You can also simply write down on paper everything you spend. There are also many apps that help you do the same thing so you can access it from anywhere.
We recommend Tiller if you’re looking for an app to help you track your spending. Tiller connects to your bank and automatically pulls all of your transactions and puts them in a Google Sheet. This lets you go through your spending and find potential savings opportunities quickly and easily.
Tiller is free for the first 30 days and costs only $7 per month after that.
If budgeting is new to you, check out our budget template for new grads to help you get the basics down to free up money to throw at your student loans.
Dealing with student loan debt is overwhelming. Don’t let it convince you that you’ll never become debt free. There are many ways you can pay off student loans faster and reclaim your life, but you do have to act. With a little creativity and hard work, you’ll be free of student loan debt quicker than you ever thought was possible.
What are some other ways to raise money to pay off student loans? What have you found to be effective in paying off student loans quicker? Have you tried to refinance or consolidate your student loans?