Many people seek a university education to broaden their horizons, make lifelong friends and obtain a quality education they can benefit from the rest of their lives. However, that decision is getting harder to make the higher the cost of education rises. Per Credible, the average student loan debt in 2019 is $33,310. The average monthly payment is $393. Nearly 42.9 million people have student loans, 2.7 million of which owe more than $100,000.
From the average balance to the most extreme cases, student loans are delaying major events in people’s lives like getting married, having kids and buying a home.
The sooner they’re gone, the more you can experience life on your terms. Let’s discuss budgeting to pay down student loans.
Use a Budget App
The abundance of apps we have at our disposal make it easy to overlook the ones that can benefit us most. Using financial apps to track expenses and set goals provides anyone a simple overview of their financial hygiene at any time. Apps like Clarity Money go a step further to help manage your money by analyzing transaction history, to recommend areas to save and more efficiently. If you’re new to a job, get used to your income for a few months before you set spending limits and goals with a budget app.
Prioritize Debts Appropriately
Ideally, a student loan is the only type of debt one carries. But this obviously isn’t true for everyone. Given the relatively low interest rates of student loans, never prioritize student loan repayments over higher-interest debt (like credit cards) or secured loans (such as a car payment or mortgage).
If you don’t have enough to make your student loan payment at all, contact your loan provider about solutions before you miss your payment. You might be able to switch to an income-based, graduated or extended plan. If restructuring doesn’t help your situation, you can look into deferment, forbearance, or loan forgiveness.
Take Shortcuts & Save Windfalls
It’s common to have a student loan debt these days, but that doesn’t mean anyone should be content to tread water. Doing so may feel like a more comfortable way to live, but you’ll nothing to shorten your repayment lifecycle.
Could you sacrifice a little privacy and comfort by adding some roommates to your housing situation? Could you ride-share with a coworker instead of commute solo to work? Could you save money by paying for your auto insurance in full instead of monthly? How much could you hack your food costs by preparing simple meals you enjoy every Sunday?
Not every effort will yield significant windfalls, but they all chip away at your overall balance. What’s more, every time you choose the frugal option you get that much better at recognizing future ways to spend wisely.
Do You Save Over a Faster Student Loan Repayment?
Many pieces of financial advice recommend focusing only on getting out of debt instead of tending to various financial wellness strategies at the same time. This makes sense when the debt is from credit, but not necessarily when it’s a student loan.
If you pay off your student loans faster, you’ll have a massive weight lifted off your shoulders. But if you allocate more toward savings and retirement while keeping pace with your low-interest loan, you can reduce your balance while building your emergency fund and allowing more time for your retirement portfolio to grow. Either strategy can make sense. Choose what brings you the most satisfaction.
Becoming an adult is hard enough without burdensome student loan debts weighing on our minds. While a loan might feel like it’ll linger over our heads forever, remember that with a little planning and discipline, it too shall pass.