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If you are one of the thousands of recent college graduates you could be facing a mountain of student loan debt that you have no idea how to pay off. A decision on how to get rid of your student loans should be made before you graduate but if you are like most college seniors, thinking about paying off student loan debt is the furthest thing from your mind.
But once you graduate, reality sets in. You start getting letters from your student loan provider telling you that payments will begin soon. Oh the horror.
As of 2019, there is over $1.5 trillion in student loan debt.
Luckily, there is hope. You can pay off your student loans in a reasonable amount of time. You just have to commit to it. And that is where this post comes in.
I am going to walk you through 4 easy steps to get rid of student loans as quickly as possible. The sooner you get them paid off, the more free cash flow you will have.
This means you can do things like:
- Invest more for retirement
- Take a job you love without worrying 100% on the pay
- Start saving for a house
- Save for a vacation
Whatever plans you may have, paying off your student loans will help you get there. So let’s get started with how to get rid of student loans.
Table of Contents
4 Steps For How To Get Rid of Students Loans
Step 1: Assess How Much You Owe
Most students have multiple student loans that they take out over the course of their college career and as a result, have trouble keeping track of them. Many times, you don’t have a clear grasp of the number of loans you have or even how much you owe.
Therefore, the first step to getting a clear picture of how much you owe is to see how many loans you have and calculate the total cost of your loans. This is the first step to creating a budget to pay back the loans and creating a schedule for repayment.
An easy way to do this is to use an amortization schedule calculator. By entering in a few pieces of information, you will see a breakdown of your payments and how long it will take you to pay off your student loans.
You can use this great app to help you organize all of this information.
Step 2: Consolidate And Refinance Your Loans
Once you have a clear idea of how many student loans you have and how much you owe from each creditor, you might be shocked. Then fear may sit in. You wonder how in the world you will ever be able to pay them back.
I’ve been there. It isn’t a fun place to be. You have a couple of options when it comes to making the monthly amount you owe more manageable.
First, you can try to refinance and consolidate. In the past, this was a hassle. But it is much easier now. You can use a third party to help you. All you have to do is enter in some information about your loans and they will do a soft pull on your credit. It takes less than 10 minutes.
What you get is a list of various companies that you could refinance with and their interest rates. You decide if it makes sense to refinance and consolidate or not. Since this is free, it is a smart first step. You get a good idea of your options and can think about your next move without committing to anything.
Second, you can try to talk with your lender. They might be able to put you on an income based repayment plan. This means your monthly payment will be less, but if you only pay the monthly balance, you are going to be paying your loans back for 15 years or more.
Third, if you have Federal student loans, you may be able to get some of the balance forgiven. If you volunteer for PeaceCorps, they will forgive a portion of your debt. If you work for a public service firm, such as a public school teacher, social worker, a policeman or a firefighter, you can also get a portion forgiven.
When I had my loans, I went with the income based repayment plan. At the time, refinancing wasn’t an option. The lower monthly payments helped in the beginning while I struggled to find a job. Then once I did, I made sure I paid extra each month. There was no way I wanted to be making payments for 15 years!
If I had student loans today, I would definitely start out with a free refinance quote just to see what lower interest rate I might be able to get and go from there. The less interest you have to pay, the more money you get to keep.
If you decide that you want to just pay off your student loans on your own, I highly suggest you use an app to keep track of things. It costs $4.99 but you get a repayment plan for your student loans and it helps to keep you motivated to pay off your student loans quickly. You can even use the app for any debt you have as well.
And while you are at it, now is a great time to start keeping track of your net worth. Doing so will encourage you to save more and pay off debt so you can reach your goals. The easiest way to start tracking your net worth is by using Personal Capital. Just link up your accounts for free and they will crunch the numbers and give you a clear picture of your financial life.
Step 3: Create A Repayment Schedule
In order to get rid of student loans, you have to make monthly payments. The best way to ensure you never miss a payment and actually pay on time each month is to make it automatic. You can usually work with your lender on figuring out a day of the month to make your payment.
I would suggest you set up the automatic payment with the student loan company as opposed to your bank. The reason is because if there is a glitch in the system, it is on the student loan company. If you set up bill pay with your bank and you payment isn’t made, the student loan company is going to have issues with you and will impose penalties on you.
For me, I set up my automatic payment with the student loan company for the minimum amount. Then each month when I got paid, I would log onto their website and make an additional payment of $100 or so.
Alternatively, you can set up a spreadsheet to pay off your student loans too. The best is to follow the debt snowball method to getting out of debt.
It is hands down the best plan to use to get rid of your student loan debt.
Step 4: Live Below Your Means
This is perhaps the most effective way to put more money towards paying off your loans. If you have followed the steps so far, you know your overall balance and how much you need to pay each month. You also know how long it will take to pay off your student loans completely assuming you only pay the monthly amount.
But you want to get rid of student loans faster. In order to do this, you need to live below your means. In other words, you need to find ways to cut your monthly expenses so that you can afford to put more money towards your student loans.
So what are some easy ways for you to reduce your monthly spending?
Live like a college student. I know you want to a nice apartment, a new car, clothes and to go out every night. But this is foolish. Find a cheap apartment that meets your needs or find a couple roommates to split the rent. Keep driving your current car. Try to get by without buying a new wardrobe. The more you can do this, the better.
Get a cheaper cell phone plan. Stop spending $100 a month for cell service. Go with a reseller like Cricket. They are who I use. I get unlimited calls and texts and 3 GB of data for $35 a month. They use AT&T lines since they are owned by them. I’ve never had an issue in the few years I’ve been with them. If you sign up through this link, you can get a $25 credit on your first bill!
Shop smarter. If you do need to buy things, be smart about it. Shop sales. Look for coupons so that you can pay a lower price. One way I save money when shopping online is to use ebates. They are a free shopping portal that gives cash back at thousands of retailers. Every few months I get money in my PayPal account from them for shopping through their portal. They are currently offering new members a $10 gift card just for signing up!
Automate savings. You can use technology to help you pay off your student loans as well. While Digit is for saving a small amount of money here and there, you can use your savings to pay off your student loans. Just transfer the money from the savings account back to your checking account and then make an extra payment on your student loans.
Another option is Qapital. This app works by rounding up your spending. The money goes into a savings account that you can then earmark for your student loans. I’ve been using Digit to save for over a year and have saved more than $1,000. With Qapital I’ve been able to save an additional $100 from rounding up in the couple months I’ve been using them.
Work hard. No this isn’t a way to cut spending but it needs to be said. Make yourself invaluable at work. Take on new projects. Help your boss out with things she doesn’t enjoy doing. When you become invaluable, you increase your job security and you can then negotiate for larger raises. With more income coming in, you can put more money towards your student loans each month.
Add income sources. Another option in addition to getting a raise at work is to moonlight. Are there hobbies you enjoy that you can make money from? I’ve used side hustles to make thousands each year. That extra money goes a long way in not only getting rid of student loans but also saving and investing more. You can read this post to get some ideas for ways to make extra money.
Cutting your monthly expenses now and paying more towards your student loans is one the smartest things you can do. While you might be tempted to live like your friends who seem to have it all, try to not give in. Trust me. In 10 years when your loans are paid off, they will still be paying hundred of dollars each month.
You being student loan debt free will allow you so much more freedom and so much less stress in life because you don’t have a debt burden to repay. Think about it. Do you really want to be burdened with student loan debt while starting a family? Wouldn’t you rather enjoy that time than have to work more in order to afford to pay off your student loans?
Take the time now and pay extra so that you can get rid of your student loans.
Student loan debts are no laughing matter. If you are just starting out in your career you could end up spending the bulk of your income on paying back your student loans. To enjoy the fruits of your labor now, you need to take efficient and effective steps to deal with your loans the fastest way you can.
Get a clear picture of your loans, consolidate, create and stick to a schedule of payment and live below your means so that you have more savings which you can use to get rid of student loans quicker.
By following these steps you have a fighting chance of getting your loans paid off in a few years and a good chance of enjoying a debt-free life as you start your career.
I have over 15 years experience in the financial services industry and 20 years investing in the stock market. I have both my undergrad and graduate degrees in Finance, and am FINRA Series 65 licensed and have a Certificate in Financial Planning.
Visit my About Me page to learn more about me and why I am your trusted personal finance expert.