If you’ve graduated recently, you’ve had enough time to figure out by now that time flies as an adult, especially when your finances are added to the equation.
It feels like you were just walking across the stage to receive your degree and you certainly knew how to make some change in your pocket last as long as you needed before calling mom and dad. But now, real life is happening! It’s time to start paying real bills and on top of that, your six-month grace period on your student loans is coming to an end.
But now, real life is happening! It’s time to start paying real bills and on top of that, your six-month grace period on your student loans is coming to an end.
Some of you have already landed a job that you’ve no doubt worked your butt off for these last few years. Some of you are still looking. Unfortunately, ole Sallie doesn’t care one way or the other and is expecting her payments on time, every time.
I have a few ideas that will help you save money on your student loans I thought I’d share. Hopefully, these strategies will put your mind at ease because you’ll have the information needed to create a plan of action to help you get ahead of your student loans.
Let’s not delay any longer. Here are 5 ways you can save money on your student loans.
5 Ways New Grads Can Save Money on Student Loans
1) Do some damage with the debt avalanche method.
The debt avalanche method is where you focus on throwing as much money as you can towards your student loans with the highest interest rates first versus the highest balance.
Doing so will save you a lot of money in interest because you’ll be paying back your loan quickly, thereby reducing the amount you’ll owe overall for borrowing the money in the first place.
Simply list your student loans from the highest to lowest interest rates and battle it out. This is the method I’m currently using and it’s going to pay off big time in the long run.
Related Reading: How to Create a Plan of Attack on Your Student Loan Interest
2) Claim interest paid on your taxes to save money on student loans.
Every year, your provider will send you a 1098-E to use when you’re filing your taxes if you paid over $600 in interest. This document details exactly how much you’ve paid in student loan interest to your loan provider during the year.
You may be eligible to deduct up to $2,500 of interest each year which lowers your taxable income. If you’re married filing separately or your modified adjusted gross income is $80,000 (single) or $160,000 (married), you won’t qualify for student loan deduction.
3) A deferment or forbearance could cost you.
It may sound like a good idea to take an extra reprieve from making any student loan payments; however, consider the long-term implications.
A deferment allows you to delay payment of your principal balance on your student loans. Also, depending on the type of loan, you may also be able to defer your interest too. The federal government pays interests on deferred direct subsidized loans, federal Perkins loans, and subsidized federal Stafford loans.
If you have any Plus or unsubsidized loans, the interest will continue to accrue during deferment. If you decide not to make interest payments during your deferment, the interest may be capitalized (a cute way of saying they’re adding this to your principal balance). This increases the amount you owe in the future.
A forbearance allows those who don’t qualify for a deferment to stop or reduce payments for up to 12 months. Interest will continue to grow on all of your student loans during a forbearance — regardless of the type. Again, if you don’t pay your interest during forbearance, it will be capitalized and you will end up owing more.
4) Refinance to save money on student loans, if you can afford the tradeoff!
Some things I would carefully weigh before considering a refinance of student loans would be:
- Is my income secure?
- Do I have disability insurance?
- Do I make enough to afford higher monthly payments?
- How much will I save over the long-term?
Why ask all of these questions? Because, if you refinance your loan, you’re essentially taking out a new loan with a private provider to gain the perks of paying a lower interest rate. By doing this, you are essentially giving up any federal benefits such as income-driven repayment plans or deferment.
If your income changes and you’re not able to afford the payments, you’re up the creek without a paddle. Also, if you don’t have disability insurance and you get hurt or have to take medical leave, you will still be responsible for making your refinanced student loan payments.
Take the time to make sure your needs will be covered and that you’ve considered these questions before refinancing.
If you feel that refinancing is the best solution for you, I recommend using LendEdu’s student loan refinancing comparison tool. Simply fill out the questionnaire and they will find the best loan and interest rates for you.
Additional Reading: Should You Consider Refinancing Your Student Loans?
5) Make more money.
The last point of discussion is making more money! You should do everything you can to increase your income!
Making more money will allow you to put more money towards your student loans sooner rather than later. This will help you avoid paying interest any longer than you have to.
If you can, negotiate a higher wage or consider a new job to get a higher income. In addition, I highly recommend adding a side-hustle to the mix.
My side hustle is blogging and freelancing which has allowed me to pay an extra $1,900 on one of my student loans this summer. As I move forward, I anticipate accelerating my debt repayment as my online side hustle income continues to increase.
If you’re interested in starting a blog, I’ve created an easy to follow guide that will walk you through how to start a blog.
Related Reading: How to Decide What Kind of Blog You Should Start
Wrapping Thangs Up
We can all agree that having a lot of student loans pretty much sucks. However, the difference between us and others is our willingness to be proactive and do something about it.
Whining ain’t never going to pay any bills. Instead, be proactive and consider alternative ways to pay off your student loan debt.
It may seem like a lot of trouble now to negotiate higher income, side hustle, refinance, or rethinking payment strategies — however, it’s only for a season. Utilize some of these methods to save money on student loans and you’ll be debt free before you know it.
Any other ways these new grads can save money on their student loans?