4 Frugal Tips to Pay Off Your Student Loans Faster
Struggling with student loan debt? You’re not alone. There are 44 million people in the United States with student debt and combined, they owe about $1.4 trillion.
That’s a massive amount of debt.
To make matters worse, the delinquency rate of these loans is 11.2%, and many of those who are in default are facing wage garnishment. That’s right – you can’t escape your student loan debt no matter how hard you try.
There is some good news: you can pay off your student loans faster if you get serious. These four frugal tips can help you get out from under your debt burden faster.
1. Eat at Home
How much do you spend eating out – fast food and restaurants – every week? A trip to the coffee shop here and a quick run through the drive-thru there adds up quickly.
Starting now, make a commitment to start eating at home more often. Keep it to once a week or less if you can.
The average American household spent $3,008 on eating out in 2014, according to the Bureau of Labor Statistics. Americans spent about $4,015 on groceries or about $334 per month.
Stick to just groceries, and you can save yourself thousands of dollars a year.
You don’t have to ditch your social life, but you can cut back on those solo trips to grab a quick bite to eat. That’s about $250 a month.
2. Cut Out Unnecessary Expenses
Sit down and go through all of your expenses to see which ones you can get rid of. Trim back where you can.
- Cancel the premium channels on your cable bill
- Cancel cable altogether
- Get rid of your house phone if you always use your cell phone
- Reduce your grooming habits
- Cut back on how much clothes you buy
- Stop buying coffee every day
Trimming or cutting your expenses can go a long way in helping you save money that you can put towards your loans.
3. Consider Refinancing Your Student Loan
If you have private student loans, you may consider refinancing. Refinancing your private student debt will give you a lower rate, which translates to lower monthly payments and less money spent over the life of the loan. You can check out what your payment might be by using the student loan refiance calculator.
Depending on your credit and your income level, you may be able to get a rate as low as 3%.
If you only have federal student loans, think twice before refinancing. You can only refinance through private lenders, which means you can no longer take advantage of income-driven repayment plans and other protections that come with federal debt.
4. Take Advantage of Federal Payment Plans
Speaking of income-driven repayment plans, did you know that the government offers a variety of plans that are based on how much you make?
Income-driven repayment plans lower your payments to about 10% of your discretionary income (in most cases). If you’re struggling to pay your loans every month, this is an option you may want to seriously consider.
With some plans, debt is forgiven after 25 years, but that forgiven amount will be taxed.
If you can afford to make your payments, you may still want to take advantage of these plans, and simply put more money towards some loans to pay off your debt faster.
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