Student loan debt is a real problem in the United States – it balances $ 1.7 trillion, and the average student loan borrower has more than $ 39,000 in student loan debt. It is estimated that about 70% of college graduates graduate with some degree of student loan debt. And without a good student loan repayment plan, making progress can be a real struggle.
While there are many programs and options available to help borrowers pay off student loan debts, it can be overwhelming. It’s basically analytical paralysis.
There are over 100 combinations of student loan types, repayment programs, award options, and hardship case options. It can be really confusing what to do when looking to reduce your student loan debt.
Then add in general student loan scams that exploit borrowers and it can get messy.
With that in mind, here are six tips to help 20-year-olds pay off their college debts (or at least get started on the right foot).
1. Get organized
Before you can start making plans, you need to organize yourself financially. I’m not talking about a budget (but that helps and we’ll cover it later). I’m talking about just finding out what you owe, what you have, and where it is.
The average college graduate has 5 different student loans. One for each academic year and maybe an additional one for a summer semester or an additional year. If you’re lucky, all of your five student loans are with the same loan service provider. But most people aren’t that lucky. You can have one or two loans in different locations.
So when you leave school, you need to locate your student loans AND make sure all of your information is up to date. Think about it: as a freshman, does your address still match your current address? For most people, that’s a no.
Also, make sure you have an up-to-date login to your credit service provider’s website and NEVER use your school email address (some colleges turn off graduate email after about 6 months). Make sure to use your “real” adult email address.
If you’re having trouble finding your Student Loans, check out this complete guide: How to Find Your Student Loans.
2. Find the right repayment program
Now that you are organized with your student loans, you can make a wise decision about the best repayment program.
Which is the “right” student loan repayment program? It is the one that you can afford to make the monthly payments for every month without any mistakes.
There are many options – and the Standard is one of the highest monthly payments: the Standard 10 year repayment plan.
If you’re struggling with this plan, consider an income-driven repayment plan like IBR, PAYE, or RePAYE.
If you don’t know which is the best, consider using a tool like Chipper that will analyze your loans and help you find the best repayment plan. You can also read our full guide on choosing the best student loan repayment plan here.
3. Look for student loan forgiveness programs
Did you know that there are over 80 different programs and options to get your student loans out? Seriously!
There are currently several federal and state student loan relief programs that could help you eliminate some or all of your student loan debt. And this without changes from President Biden.
But these programs don’t give you student loan forgiveness for free. They all require some type of dedication, work, application, or other “sacrifice” in order to extend your credit.
For example, one of the best programs that are currently available is public service loan allocation. This program provides full, tax-free student loan waiver if you have served in any government service for 10 years (120 payments) and make eligible payments during that time. Any balance at the 10 year mark is awarded. That’s great!
When you have a student loan, you owe it to yourself to do your homework and see if you are eligible for some type of loan waiver. We estimate that around 50% of borrowers qualify for something – don’t leave free money on the table.
4. Live at home
According to a recent survey, 52% of young adults live with their parents. That is a 46% increase in 2019. While some may not consider home life a great thing, depending on how you use your time (and money) while living at home, this could be the stepping stone for yours be financial success.
Think about it: if a person owes $ 25,000 in student loan debt, they can pay it off quickly if they live at home. The $ 25,000 payout is approximately $ 1,043 per month for 24 months. That’s less than the average 1-bedroom rental in the US (fun fact – that number is $ 1,098 a month).
Even if this isn’t fun, it’s a quick way to get rid of debt for good. It just all depends on how you use your money while living at home.
5. Earn Extra Income
This idea runs into a lot of slack at times – people shouldn’t “have to” earn extra money outside of their main job in order to be able to afford their loans. And maybe you are right – but the reality is that there are two sides to the personal financial equation: income and expenses. You can increase your income or decrease your expenses to meet your financial goals (whatever they are).
And let’s face it – most young adults have more free time than they realize (especially in front of the family). When they have a “real job,” most of them come home from work at five or six every night. Or right now – you can work from home anyway!
To take advantage of this free time, you could try working as a waiter or bartender at night. That way, you can easily make an extra few hundred dollars a week. You can use this money to pay off your debts and get the loans down quickly.
You don’t want to take on a second job? You can also take on a variety of sideline jobs to increase your income. There are so many sideline opportunities that can make you an extra few hundred dollars a month. This may not look like much, but it can help you pay off your student loans.
Not sure where to start? Now check out the list of the best side hustles.
6. Set up your budget properly
I’m not a big fan of budgeting, but you need to at least get the basics of your budget right – you can’t spend more than you bring in and expect to pay back your student loan debt.
One key to this is simply getting the basics of your budget right. Depending on your personality, this can be very detailed or at a high level. But you have to think about what works for you.
You should also think about which tools to budget with – again based on your personality. Do you like to use apps? Are you the pen and paper type? Maybe you are a spreadsheet guru?
Depending on your style, you need to find a budgeting tool that is right for you. You can use your budgeting tool to create a budget and monitor your spending so that you meet your financial goals.
Final thoughts (and bonus tip)
When it comes to paying off your student loan debt, there is no silver bullet. You need to create a plan and execute the plan. The plan could incorporate various forms of programs and tactics.
But here’s the bonus tip – you can combine some (or all) of the tips above to make progress. Nothing is either / or here. Indeed you are should do all of the above.
Can you find a repayment program that suits you? Yes. Earn more money and cut expenses along with it? Yes. And live at home while doing it? Yes.
By putting all of these tips into practice, you will get out of student loan debt much faster than you ever thought possible.
Do you have any other tips to help young adults get out of student loan debt?