7 Steps to Getting Rid of Student Loan Debt That Most People Haven’t Tried
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When I was at my brokest and plagued with student loan debt I couldn’t possibly repay, my first instinct was to ignore it.
Not my Penny Hoarder-est moment, I admit.
But what can you do when you’re choosing between groceries and the electricity bill, and the federal government asks for $300? I laughed and swept it under the rug… and racked up 10s of thousands in interest and fees over the years
I wish I’d known there were better options.
Try These Tricks When You're Paying Down Student Loans
If I’d have tried these tricks right after leaving college, I might not be sitting on $58,000 in debt right now.
I hope you can learn from my mistakes — and the troves of financial wisdom I’ve gained since joining The Penny Hoarder.
When it comes to paying off student loans, here are some smart ways to do it faster — before they balloon to an unmanageable amount.
1. Figure out What You Owe
The first step to paying off student loans is knowing what you owe.
Considering you often sign off on student loans as a teenager without a clear understanding of what they even are, we understand if you’re not 100% sure where to begin.
Credit Sesame will let you see how much money you owe and to whom (even if you’ve defaulted on loans). It’ll show your balance on both private and federal loans and offer tips to help reduce your debt and raise your credit score.
2. Lower Your Interest Rate
For some, this could be one of the best ways to pay off student loans.
Consider refinancing your student loans so you can pay them off faster and save money in the long run.
An easy way to do this is with LendKey, a service that allows you to quickly browse low-interest loans from credit unions and community banks.
That’s LendKey’s secret sauce. Compared to the big national bank chains, smaller community banks often offer more borrower-friendly loan terms — namely, lower interest rates and more flexibility.
LendKey’s simple, straightforward online platform can help you find and apply for the right loan without visiting a dozen bank branches.
And if you’ve been turned down by other lenders, don’t fret. LendKey has more lenient credit score minimums and income requirements for applicants, so you have a better shot at getting a loan through the company.
Plus, when you’re approved for a loan you applied for through LendKey, you’ll get a $100 bonus after the loan is disbursed.
3. Build Savings You Can Put Toward Student Loan Payments
You know how much you owe, but you obviously want to owe less, right?
Check out an app called Stash. Stash can help you start investing and potentially grow your money so you can put it toward your debt. You don’t have to have an MBA or even make it all the way through “The Big Short” to understand how to invest with this app.
You just choose from a set of simple portfolios reflecting your beliefs, interests and goals, and it does the rest when you turn on “Auto-Stash.”
Plus, you'll get a $5 bonus when you make your first investment.
4. Enroll in an Income-Driven Repayment Plan
Even if you don’t consolidate your loans, you could benefit from an income-driven repayment plan. These plans could help you avoid default or deferment, so you can continue to make steady progress on repayment.
These loans come in four different (but similar) varieties:
- Pay As You Earn (PAYE Plan)
- Income-Based Repayment Plan (IBR Plan)
- Income-Contingent Repayment Plan (ICR Plan)
- Revised Pay As You Earn (REPAYE Plan)
5. Cut Your Expenses
Maybe you’re struggling to make your student loan payments simply because you’re spending too much money somewhere else.
No judgement here — everyone’s financial situation is unique. But if you’re falling behind on bills, it’s worth taking a look at your budget.
New to managing a household budget? This spreadsheet can help.
And try these tips to save money on your everyday expenses:
If you need help setting aside the money you’ll save, let these apps do it for you.
6. Start a Side Hustle
When you can’t cut spending anymore, it’s time to bring in more money.
If you’re strapped for time, start small. These 12 apps will help you earn extra money for doing almost nothing. Or try something a little more lucrative, like cashing in your aluminum cans for $150 a month.
When you have time to take it a step further, try launching a flexible side hustle, like reselling clothes and other thrift store items, or driving with Uber and Lyft.
Or, have a spare room? Might as well list it on Airbnb to make some money off it.
If you’re a good host with a desirable space, you could add hundreds — even thousands — of dollars to your savings account with Airbnb.
(Hosting laws vary from city to city. Please understand the rules and regulations applicable to your city and listing.)
These gigs let you earn more money when you’ve got the time and energy to hustle — and take a break when you’re worn down by a day job, family responsibilities or school.
You could bank an extra $50 or $100 a month without a ton of effort, and that money can make a huge dent in your student loans.
Need more inspiration? Here are 32 ways to make extra money this month.
7. Declare Bankruptcy (If You Have No Other Option)
If all else fails, you can discharge your student loans in bankruptcy — in limited cases.
It’s hard to do, and not very common, but if you’re in dire straits, it’s worth looking into. For your student debt to be considered “undue hardship,” you have to meet the following criteria:
- You’re unable to maintain a minimum standard of living.
- Your situation is not likely to change.
- You’ve made a good-faith effort to repay loans to this point.
A lot depends on your personal circumstances, so always consult an attorney if you’re considering filing bankruptcy.
Paying Off Student Loans
Student loan debt is a ball and chain weighing a lot of us down.
But you don’t have to be chained to it forever. Options like these can make a big difference on your financial situation and help you get rid of that debt once and for all.
Dana Sitar ([email protected]) is a writer and editor at The Penny Hoarder. Say hi and tell her a good joke on Twitter @danasitar.