How to Start Lowering Your Student Loan Debt

Welcome to the “oh i don’t want to think about that” topic. It’s OK. First let’s take a deep breath. Below, I have outlined some quick wins on tackling student loan debt. While the topic is Student Loan Debt, these strategies can be applied to other loans/debts as well. Without further ado, let’s take a look at the lineup of quick wins:

1. Get Organized – surprised to see this guy make it to # 1 spot on the list? Well, you shouldn’t be! The first and most important step is to get all of your loans current details and get organized. Whether you are comfortable jotting down notes on a piece of paper, a notepad, an excel file or even putting it in the cloud with a Google spreadsheet. It pays to know the following:
   • how many loans do you REALLY have
   • what are the total current amounts
   • what are the interest rates for each loan
   • what are the monthly minimum payments
   • what loans are subsidized vs unsubsidized vs private and group them as such
   • did you get any grants and were they applied successfully to your “tab”
2. Goal Setting – Being an adult requires goal setting whether it relates to personal finance or not. If you take a macro view of your loans you may get overwhelmed and feel that it is impossible to tackle. Breaking down large “projects” into smaller sprints makes them manageable and attainable. It will also give you a realistic perspective on what expect and outcomes. Here’s some sample goal setting tips:
   • understand what is your monthly net income after expenses, savings, entertainment (leaving out student loan repayments)
   • prioritize the loans that have the higher interest rates first
   • forecast your repayment schedule. If you pay X amount per month over Y term, what will be the number of months before you can successfully complete the repayment. This figure should then be utilized to tweak the payment amount to make it feasible and balance comfortability against aggressiveness
   • set your milestones. Once you have paid $2k, $5k, $10k, etc. set aside a moment to celebrate your milestones. When you are mentally aware of your goals and progress, you will naturally motivate yourself to stay on track and aggressively tackle the debt
3. Get Rid of Crap – Now that you’ve figured out how much you owe, at what interest rate(s) and what your repayment gameplan looks like, it’s time to get rid of stuff around your place that you absolutely do not need. You’d be surprised how much “junk” you may have lying around that may be valuable to others. I have personally used Craigslist and eBay to get at least $10k for my junk. Of course this will be overtime but the supplemental income will enable you to make more payments and aggressively tackle your loans. Remember, the faster the repayment, the less you incur in interest charges. Time is of the essence, my friend.
4. Financial Options – Consolidation options are out there. Interest free financing credit card deals are out there. Simply put, financial options are out there to help you with your loans. Let’s take a quick look:
   • do you have government loans at high interest rates? Consider consolidating them to private loans at a lower interest rates. Of course if your government loans come with special financing options such as income based, deferment, etc., you will want to weigh your options before consolidating
   • there are credit cards available that offer 0% financing for new card members for periods of 6 months all the way to 24 months. Let’s say you have a loan of $5k that you plan to repay over the next 6-12 months. By signing up for a credit card offer that gives 0% to new card members, you can offset interest charges and also have the flexibility with repayment. You can even take the $5k that you were going to use for repayment and put it into a 12 month CD to earn interest on your money before repayment. Sounds good, doesn’t it?
   • let’s talk about scary mutual funds. Another possible income generating option is to take your saved money and place it in an interest earning mutual fund. Mutual funds are a safer alternative to investing directly into stocks as your risk is spread across multiple equities that are part of the fund. Let’s say you put $10k in a mutual fund that has a rate of return of 4% (thats a modest ROR) and your loan is locked in at 5%, then technically you are only paying 1% in interest difference. Pretty sweet setup if you invest the time and energy to research reliable interest earning mutual funds
5. Work, No Play – as the bold text suggests. The main variable between you and paying off your loans is the amount of commitment you are willing to make to your student loan repayment schedule and goals. With that said, some of us are salaried and can ONLY work 40 hours and no overtime. If you are eligible for overtime and are not taking advantage of it and have student loan debt – what is your problem? Now on to some tips on generating residual income:
   • if you have a skill or talent that you can tutor/train others on in your spare time, it is a great way to earn some additional $$$. Some subject ideas include STEM (science, technology, engineering, mathematics), standardized testing (SAT, ACT, LSAT, GMAT, GRE,..),  computer lessons for elderly folks, computer applications (excel, photoshop, etc.) and pretty much anything else that is in demand
   • are you internet saavy? You can help others sell THEIR stuff online and generate some side income
   • are you handy? People are always looking for handymen on craigslist for small odd jobs around the house
   • do you live in an area that requires outdoor related work? For example, snow removal, landscaping, pool openings/closings, etc.

Have an idea or tip of your own? Please share it in the comments and maybe we can add it to this list!