Episode 21: 10 Creative ways to pay off your student loans.
In this episode, you will:
- How to quickly pay off your student loan debt
Click to listen:
If you really want to get at it, if you want to become aggressive, if you are sick and tired of paying Sallie Mae, then today’s episode is for you. You are a goal getter, you don’t want to depend on anyone to help you pay off your student debt, you are ready to get out of debt. This podcast is about education, and I want to empower you by providing information that will help you to succeed in your finance and career.
Here are the 10 creative ways you can get your student loan paid off quickly.
- Pay while in school: Many people may not know this, but do you know that you can start paying off your student while in school. You do not have to wait till graduation to start making payments. The way the student loan work is that the interest accrues on loan. For example, if you borrowed $10,000 while in school, by the time you graduate, that $10,000 depending on the interest rate and the number of years you. Were in school would have grown to about $12,000 to $14,000. If you get a part-time job while in college, and if you can start making as little as $300 monthly payment on your loans, by the time you graduate, you would have reduced the loan that you took, and avoid the accrued interests. I did not know about this when I took my loan, and it pained me. I do not want you to make the same mistake, so please find a way to start paying the loan back even when you are in college. By the way, the only type of loans that will not accrued interests are the federal government loans.
- Pay more than the minimum payment: The minimum payment is a trap meant to perpetuate you in debt. Please ignore the minimum payment and ensure you pay a little extra whenever possible towards your student loan debt. We do not want to keep this loan for too long if you pay more than minimum on your student loan debt, and by the way, this applies to any debt, you will be able to reduce the length of the debt, and quickly pay it off. Hopefully, your loans do not come with a pre-payment penalty. I strongly advise against taking any loan with a pre-payment penalty. It is costly, and what the lender is telling you is that you must stay in debt for the entire term of the loan. Please watch out for this. DO NOT TAKE OUT LOANS WITH PRE-PAYMENT PENALTY.
- Consolidate and refinance your student loans: You should consider consolidating and refinancing your student loan especially if you currently have a high interest rate on your loans. This will help to make it cheaper, reduce the interest that the bank is charging on the loans, making it possible to pay more money towards the principal.
- Start a side hustle: In episode 11, of my show, I shared five examples of side hustle that anyone can do to earn more money. If you haven’t listened to that episode, please go back and listen to get all the details. You can also go to my website, www.winnersways.com to download the transcript of that episode. I also recently published an ebook titled “Money Equation: How to save more money and retire rich.” I went into more details and shared more ideas that you can use to reduce your cost of living. Check out the ebook on Amazon. You can read it for free with your Kindle, or you can download it only for $0.99. Side hustles are jobs that are different from your primary source of income, that you picked up in order to make more money. It may be a temporary situation – driving Uber, delivering Pizza, etc. The goal of this particular strategy is to increase your income so that you can allocate more money towards paying your loan.
- Reduce your living expenses/Trim your budget: There are two sides to the money equation. The income side, and the expenses side. To be able to allocate more money towards paying off your student loan, you either need to increase your earning or reduce your expenses. Let’s trim your budget by reducing your living expenses so that you can dedicate the extra money towards paying off your student loan. I have used this method, and I was able to cut my bill by almost 20%. Again, check out my post on winners ways website on 5 Awesome ways to save more money for creative ways you can cut down your bills.
- Utilize a cash windfall: A buddy of mine works on Wall Street, used his bonus check consecutively for three years to pay off his entire student loan debt. Some bankers, depending on their level of experience and the nature of their jobs, typically get annual bonuses. This friend of mine had over $150K student loan, his bonuses each year is about $60K, so he just diverted his entire bonus towards his student loan payment, and within three years he was able to clear up the debt. You may not earn the level of Wall Street bonus, but if you get a bonus at all from work, consider it a windfall and apply it towards paying off your student loans. If you get tax refunds or any form of financial gifts, you should pay it towards your student loan.
- Apply your raises: When it comes to paying off your loans, anything and everything should be on the table. You should start by going to your boss and asking for a pay raise. Of course, make sure you are adding value to the company otherwise your request will be unreasonable and unworthy of consideration. If you are not a good employee, your employer will not listen to this request. EPISODE #14: IMPACT MAKER. You can also explore opportunities outside your current company to see if you can get a salary bump. On average, when people change jobs, they typically get about a 10% pay raise. It will be ideal to apply the raise towards your student loan so that you can quickly pay it off.
- Pay bi-weekly: This is a technique that you can use to pay off your student loan debt quickly. The way it works is that you change your payment from monthly to bi-weekly. For example, if your monthly payment on your student loan is $400, that will be $4,800 per year. If you do bi-weekly, on the other hand, you will be paying $200 every two weeks, and this will become $5,200 per year. Voila, you’ve been able to pay an extra one month by using this technique. Again, you can use this method as well for your mortgage or car loan, or any debt you may have.
- Let your employer pay: It takes a little negotiation to get your employer to pay your college tuition loan retroactively. You can use this as a bargaining chip when you are getting hired into a new company. Ask the HR person, if the company has any form of tuition reimbursement program. The worst they will say is no. Even if they say no, you can ask for a sign-on bonus. The best way to get your employer to pay for your tuition is to have been employed by them already, and maybe you want to go for graduate studies, you will then apply, and they will pay you as long as you maintain certain grades.
- Increase your earning: How can you improve your skills and become more relevant at work? Let your student loan debt be a source of motivation for you to become better, learn new skills so that you can qualify for promotion on your job. Promotion comes with pay raise, and you can apply the raise towards your student loan payment as well.