Save Money on Student Loans: 5 Strategies for New Grads

September 19, 2016
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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.


Are you looking for ways to save money on your student loans? Here are 5 ways you can shave interest and years off 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?


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Latoya Scott
CFEI/Social Entrepreneur
Latoya Scott is a Certified Financial Education Instructor and personal finance writer with a mission to help millennials learn how to stop living paycheck to paycheck so they can become financially carefree.

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  • Holly@ClubThrifty September 19, 2016 at 10:43 am

    This is a good list. I like how you warn people of the downsides of deferment and forbearance. A lot of people use those measures as a solution to their problems when, really, they just delay the inevitable and even cost you more money over time. The best thing to do is find a way to tackle your student loans as quickly as you can.
    Holly@ClubThrifty recently posted…6 Great Christmas Vacation Ideas and DestinationsMy Profile

    • Latoya Scott September 19, 2016 at 11:03 pm

      Totally agree, Holly!

  • Kemkem September 19, 2016 at 10:50 am

    Great post! I would just add..stop spending on crap..It lets you focus on your point number 1. I am so glad l went to school many, many years ago when prices were still super reasonable. I couldn’t afford it now :-). Good luck with paying it down.

  • Terri September 19, 2016 at 4:21 pm

    The reasons listed are exactly why I never refinanced my loans. I want to end my relationship with private lenders – not start a new one
    Terri recently posted…How to Pay Debt, Cut Back & Save Without Losing Your Soul (+Giveaway)My Profile

    • Latoya Scott September 19, 2016 at 11:02 pm

      I know that’s right!

  • Anitra | The Mom on the Move September 19, 2016 at 11:33 pm

    Deferment is a trap! I would also add to shop around for loan consolidation terms. Sometimes it can be a good thing to reduce your immediate expenses, but in the long term you could end up paying a great deal more.

    • Latoya Scott September 20, 2016 at 10:16 pm

      Great point, Anitra!

  • Finance Solver September 20, 2016 at 12:07 am

    I know a lot of students are refinancing their student loans. I’ve been fortunate enough to not have to take on debt when I went to college but these are great tips to implement for anybody with student debt!
    Finance Solver recently posted…Get Out of Debt or Invest? Don’t Take On Bad RiskMy Profile

  • Tamika Hall September 20, 2016 at 1:09 am

    LaToya, this is a great list. Inwish i would jave had this when I graduated in 2004, lol! I was NOT prepared for life after college when it came to my loans. Great post!

    • Latoya Scott September 20, 2016 at 10:17 pm

      Me either, girl! Things got real really quick!

  • Nikka Shae September 20, 2016 at 3:01 am

    What a great list, and I could of used this back in my college days.
    Nikka Shae recently posted…Mimi’s Cafe Introduces a Newly Imagined Entrée for FallMy Profile

  • Keisha September 20, 2016 at 8:31 am

    LOL, I think #5 would be ideal for most folks.

    #3-don’t do it! Just don’t. Go income based, and pay small amounts if you have to. Forbearance and deference accrues soon much interest, lawd!

    Student loans are legit the worst but it’s semi good to know we’re not alone in the struggle. Heres to being debt free!
    Keisha recently posted…Expat Travels: Hai, Tokyo!My Profile

  • Tia @ financiallyfitandfab September 20, 2016 at 2:05 pm

    A good way for grads to get help is to find a job that will help pay your loans back for you. There aren’t many companies that offer the benefit but it’s well worth it if you can find one.
    Tia @ financiallyfitandfab recently posted…How to Save Money on Personal Care with GrouponMy Profile

    • Latoya Scott September 20, 2016 at 10:18 pm

      I sure wish I could find one, lol! I would definitely bring out the suit for that interview.

  • Ty September 20, 2016 at 2:16 pm

    Once again…great tips. I’m sharing this post
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  • Donna Shana September 20, 2016 at 2:33 pm

    Great post. I am trying to stress some of this to my family as we speak!
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  • Joanna September 20, 2016 at 7:08 pm

    Great tips. I was considering grad school, but with my line of work it’s not very necessary. I’m happy I went the cash route for undergrad though.
    Joanna recently posted…How To Spend a Holiday Weekend in AthensMy Profile

  • Tiffany H September 20, 2016 at 8:13 pm

    This a great post! Im working on the last one, trying to gain extra income. I always receive the tax form but haven’t been eligible to benefit from it. I hate student loans, I should have went to school in a country where they pay YOU to go to school. LOL
    Tiffany H recently posted…Cha-Ching: Groupon Coupons!My Profile

    • Latoya Scott September 20, 2016 at 10:21 pm

      You and me both!

  • Ramona September 20, 2016 at 9:39 pm

    Great tips. I wish I had this list when I graduated from grad school. I basically did the Debt Avalanche method to help pay off the loans quicker.

    • Latoya Scott September 20, 2016 at 10:19 pm

      This is the same method I’m employing. Great strategy!

  • MImi Green September 21, 2016 at 4:05 am

    Great tips, I’ve never had student loans but my friends talk about them all of the time. Navigating the path to paying them off can be really hard for a lot of folks.

    • Latoya Scott September 21, 2016 at 10:27 pm

      Yes, the struggle is definitely real!

  • Elle Cole September 21, 2016 at 8:16 am

    3 years after I graduated from college, I paid off my student loans. I was determined and I don’t like debt. Now the only debt I have is my mortgage and I am trying to pay that off too.
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  • Cleverly Changing September 21, 2016 at 8:21 am

    Almost, 3 years after I graduated from college, I paid off my student loans. I was determined and I don’t like debt. Now the only debt I have is my mortgage and I am trying to pay that off too. This info, is so important to many people, students loans are keeping them in debt.

  • T. Espinoza October 6, 2016 at 3:47 pm

    Awesome info! I knew about the debt avalanche but these other tips were news to me. Thanks for sharing!
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