Graduating from college, getting your degree, and landing a new job in your field of choice is part of the American dream for millions of people. But the dark side of that scenario — one that is often only an afterthought during those college years — is the specter of student debt.
Recent statistics have shown that 70 percent of college graduates carry student loan debt with them into their post-college life, with an average of $37,172 in total student debt for each borrower. That amount has more than doubled since 2005. That’s a significant financial burden, one which many college grads are currently struggling to carry.
So, how can you pay off your student loans and get out from under that burden of debt as quickly as possible? While there is no one-size-fits-all solution, there are a number of things that you can do to get your financial life in order. Here are five of them:
One of the biggest mistakes many new college grads make right out of school is that they begin inflating their lifestyle after landing a good job. For some, it seems easy to justify the added expenses of designer watches, high-end laptops and smartphones, top-of-the-line “professional attire,” and a shiny new Lexus or BMW.
Sure, you worked hard for all those years to get your degree or degrees, and you leveraged that accomplishment to get a prestigious job with a pretty good salary. But, now is not the best time to kick back and enjoy the fruits of your labor by buying a bunch of new, expensive items. You still have student loans to pay off, and your balance on those loans will hardly budge if you’re only making minimum payments.
The best way to pay off those loans is to include a little extra every month in your payment to bring the balances down more quickly. Otherwise, you could be paying them off for many years to come — perhaps even decades. This is where frugality and cash-only spending can help you out. Commit to living within your means for the next few years while you pay down those loans.
Avoid running up balances on credit cards, and instead, force yourself to pay cash for everything — or to use only your debit card linked to your checking account. If you have the self-discipline to pay off your credit cards every month, then you can use those cards, too. But be careful not to get yourself in trouble by constantly charging more than you can afford to pay off. Carrying a balance and paying interest on credit cards every month won’t help you reach your goals.
It largely comes down to prioritizing your cash flow and spending. Make it a priority to pay off loans, rent, and utilities before spending on extras like clubs, restaurants, and entertainment. Reduce unnecessary expenses like monthly subscriptions to blogs, magazines, movie websites, and similar services. You can also cook meals at home to save money.
By keeping your monthly expenses below your monthly income, you’ll have extra money to throw at those debts at the end of the month, and your loan balances will drop much faster. You’ll also save a significant amount of money on interest over the years.
While reducing your spending is one side of the debt-payment coin, increasing your income is the other. There are several ways to increase your income, but the fastest way to consistently make more money every month is to just go out and get a second job. Put in a few hours at a part-time job every evening and on weekends, and you could quickly find yourself with an extra few hundred dollars or more every week to put toward your loans.
If you worked your way through school on nights and weekends, then this will be familiar territory for you. Just keep doing what you’ve been doing. If your primary full-time job out of college leaves you with the same days and hours off, you might even be able to keep your part-time job from your college days while working to build your new career. Doing so may make the college-to-career transition go very smoothly for you with few changes to your weekly schedule. But, if you’re used to going out a lot in your free time, it will be a bit of a sacrifice to spend your free time working a second job. However, the rewards will be worth the effort.
The trick, though, is to immediately put that extra money toward your student loans rather than letting it burn a hole in your pocket. It will be tempting to whip out your credit card or bank card and splurge on food and drinks at the club on the weekends or to treat yourself at the mall every week.
It will take self-discipline and commitment to use that extra money on your debts, but you can make it easier on yourself by making payments as soon as the extra paycheck hits your account. That way, you won’t have it gnawing at the back of your mind every day.
It is easier than ever these days to start a part-time business in your spare time while continuing to work at a full-time job during the day. If you don’t know where to start, you could check sites like Craigslist and Facebook for side hustles. These could include one-time side jobs that could even turn into ongoing work.
Freelancing is another popular side business. If you have skills as a writer, photographer, musician, web designer, or graphic artist, then you can leverage these into a side business that pays very well. Many part-time freelancers even end up quitting their day jobs to freelance full time. There’s a huge variety of freelancing jobs out there. You just have to put your skills and knowledge to work.
Making money online with an internet business is also a route that could help you pay off your student debts much faster. You could use your nights and weekends to become a blogger, YouTuber, or affiliate marketer and build passive streams of income that bring extra money into your PayPal or bank account every month. It takes a lot of work up front to set up websites and create content, but in less than a year, you could be cashing checks every month — even on the months when you spend zero hours working on your business.
Another option that deserves serious consideration is debt consolidation. If you charged up a bunch of credit card debt during your college years, then that combined with your student loan debt can really add up and cause a lot of stress and financial hardship.
The minimum payments alone can really take a huge chunk out of your monthly income, even with a high-paying job in the city. And after an entire year of making those payments, you look at the balances and see that you’re no closer to paying off the principal than you were 12 months prior. That’s discouraging, but it could also be a great motivator. It can force you to look for better options.
Consolidating all of your high-interest credit card debt and student loans into pay-off loans or a long-term personal loan at a lower interest rate might be a solution for you. It can lead to lower monthly payments, which will help you stick to your monthly budget without taking on additional credit card debt just to get through the month. Pay-off loans or additional financing might not be right for everyone, so it’s important to talk with a financial expert and get some second opinions from financially responsible friends and family to see how better debt management can help you improve your financial situation.
If your income and credit are in really good shape, you might even be looking at purchasing a new home or condo. If you already have one, then you could be considering refinancing it. Consolidating high-interest debts under a second mortgage can really bring your monthly expenses down if you can get a good interest rate. So, that’s another option to look into.
Remember that while the goal is to eliminate debt in the long term, sometimes you can make faster progress by converting one type of debt into another. If a mortgage or personal loan can help you eliminate credit card spending, then that can really help you improve your cash flow and pay down your other debts faster.
One of the best things you can do to secure your financial future is to advance your career and increase your income. By earning promotions, incentive bonuses, and salary increases, you bring a lot more cash flowing into your life, and that can make it so much easier to pay off your student loans more quickly.
As mentioned already, the key here is to lock in those gains without inflating your lifestyle. Using debt payment methods like the snowball technique can really help accelerate your journey toward financial freedom, but it’s the increased income that really makes dramatic progress possible in the first place.
So how can you move up the ladder in your career? Here are several possibilities:
First, start right where you are in your new job. You got the degree, and you got the job you wanted, but now you have to prove that you were the right choice for the position. Start by taking your current job responsibilities seriously. Always do your best to complete your work quickly and accurately.
Once you are up to speed and are consistently putting out a high level of work, start looking for ways to go above and beyond your job’s minimum requirements. Ask your boss for more work. Complete it — without letting your other job duties suffer — and then ask for even more. Build a reputation for being the go-to man or woman to get those extra tasks done.
When you do receive more responsibilities, always work quickly and efficiently, but don’t stop there. Work your way to the top by working faster, harder, and longer than your peers. When the manager arrives early in the morning, you should already be there working at your desk. When the boss leaves late at the end of the day, you are still there.
High-level managers are used to being the first to arrive and the last to leave. So, when they see you there putting in the extra hours just like they are, it makes a powerful impression. That’s one of the easiest ways to get noticed and to be seen as an employee with ambition.
But don’t just sit around there waiting to be noticed. Take some initiative and ask your manager about opportunities to move up in the company. If your HR department has a website with career opportunities, keep checking on the kinds of positions that come up and put together a plan to move your career along.
You should also be constantly building out your professional network. Even if you’re an entry-level employee at your office, you can still build your influence by connecting with people in and outside of your department. You can also build the network outward by connecting with customers and vendors. Attend company social events, make it a point to meet a lot of people, and always look for ways to help others in your organization and in your community. The key to effective networking is to always think about giving value rather than asking for it from others.
If student debt has you seriously stressed out about your future, try to relax and see the light at the end of the tunnel. You’re smart, and you’re responsible. You’ve got a college degree and you’re off to a good start with your career. You have all the pieces of the puzzle that you need to make this work. You just have to put it all together and keep making progress toward your financial goals. These five tips can help you to pay down your student loans faster, become debt-free, and achieve the financial freedom that can carry you forward for the rest of your life.
Chris Fuller went to the University of South Florida and has worked in the financial sector for over 20 years. He has extensive experience in all aspects of personal and small business lending, from personal loans, equipment finance to cash flow based solutions for small mom and pop businesses, and large corporations.