Life
Student loans are something that many people have to contend with. While some people defer or default on them, others pay them back regularly, which may take years. When it comes to the best way to pay off your student loan debt, some methods work better than others.
Overall, according to the U.S. Federal Reserve, the total student loan debt in the U.S. is $1.569 trillion. To that point, College Board’s Trends in Student Aid 2018 found that in 2016-17, 59 percent of those getting a bachelor’s degree — from public and private nonprofit institutions — graduated with an average of $28,500 in debt. So, if you’re among those with student loan debt, you’re definitely not alone.
With these statistics, it’s no wonder that student loan debt can quickly become overwhelming — especially if you don’t have a set payment plan in place or haven’t created a system to most effectively pay off the debt. But, no matter how much that debt is, it doesn’t have to control your life.
“Rather than feeling chained to student loans for the next 10 years, or more, I believe that your life does not need to revolve around paying them off,” Northwestern Mutual financial advisor, Andrea Williams, tells Bustle. “It’s OK to get used to the idea of having debt while paying it off and working towards your personal goals.”
Below, Williams shares ideas on the best ways to pay off your student loan debt.
1
Remember, You Don’t Have To Pay Your Loans Off ASAP, But Also Save Money, Too
While some people think they need to pay off their loans ASAP, that’s not necessarily the case. “There is so much pressure around eliminating student loan debt as fast as possible,” Williams says. “But, thinking big picture, it may be more valuable to save money and pay off your student loans simultaneously.” She adds that working harder to pay the debt off suggests less time for leisurely activities and is unrealistic. “Fortunately, there are many options for creating a more sustainable payment plan and using your income for the things you want to do,” she says.
Williams also says that by not paying your loans off ASAP, you’ll have more money to put into savings and your emergency fund. “Being debt-free does not equate with financial security,” she says. “In the event of an emergency, without a solid savings, one single occurrence could substantially throw off your personal finances.”
2
Research An Income-Driven Payment Plan
Williams says that it’s important to find an income-driven repayment plan, which will account for your income, familial status, and other items in your life to make paying back student loans less daunting. “The payments are generally around 10 percent of your income and may forgive the remaining balance after 20-25 years,” she says. “While it may be nerve-wracking to take on a longer-term loan, this plan can help you save for the future and still afford your daily needs.” Like anything else, she says to make sure to get all the details — including payment schedule, due date, and interest rate — before making the switch.
3
See If Your Employer Has A Benefit Program For Student Loans
More and more employers seem to be offering employees student loan assistance. “Employees are job-hopping more than ever before, and some companies offer student loan stipends as a way to retain employees,” Williams says. “Check if your company offers a perk like this, or look into working for an employer that does.”
4
Make Automated Payments To A Savings Account Or Emergency Fund
You may hear that automating is crucial when it comes to saving money, and Williams agrees. “Make automated payments to a savings account or emergency fund,” she says. “That way, you can budget out what you need for student loans after you’ve put money away for yourself.”
She suggests using the 50/30/20 spending rule as a guideline. “Meaning, 50 percent of your take-home pay should go toward fixed expenses, like rent, car payments, and student loans; 30 percent is for discretionary spending; and the final 20 percent goes towards savings, such as your emergency fund and retirement plan.” She says it’s OK if 20 percent isn’t realistic yet. “As long as you are saving even five percent for the future, in an account like a 401(k), you are in good shape,” Williams says.
5
Create An Action Plan
If you have multiple student loans, it may be easy to lose track of them. So, Williams says to create a plan of action. “Map out every loan you have and the interest you pay on it,” she says. “Prioritize payments on the loans with the highest interest rates first, so you can throw less away to interest every month.” She says to write out essential information, including: total balance owed, interest rate, due date, minimum payment, and when you will pay off the loan at the rate currently paid. “Having a birds-eye-view can help you understand how much you can spend this weekend,” she says.
6
Take On A Side Hustle
Another way to help pay off your student loans is by taking on a side hustle, whether that means driving for Uber or completing tasks for people on TaskRabbit. With side hustles these days, the sky’s the limit. “Side hustles will help add extra money to your bank account, and this can free up funds to put towards your future,” Williams says. “See if you can carve out a space to do something you love and make more money while doing so.” She says, if not, use the 50/30/20 rule to the best of your ability.
7
Don’t Give In To The Stigma Surrounding Student Loan Debt
Williams says to make sure that you don’t let student loan stigma affect you. “I think the stigma around having debt is a lot for people to bear,” she says. “But having debt doesn’t make you worse off than anyone else, especially since nearly 45 million Americans have student loan debt.” She says to remember that you can have student loan debt and still save for the future.
As you can see, paying off your student loans doesn’t mean you have to put the rest of your life on hold to do so. And, per Williams’ advice above, creating a healthy balance between the two is key.
