Student loan debt is a real problem in the United States — reaching a balance of $1.7 trillion, and the average student loan borrower owing upwards of $39,000 in student loan debt. It’s estimated that roughly 70% of college graduates graduate with some level of student loan debt. And without a good plan to pay off student loan debt, it can be a real struggle to make progress.
While there are a lot of programs and options to help borrowers pay off student loan debt, it can be overwhelming. It is basically analysis paralysis.
There are over 100 combinations of student loan types, repayment programs, forgiveness options, and hardship options. It can be really confusing on what to do if you’re looking to eliminate your student loan debt.
Then, you add in common student loan scams that prey on borrowers, and it can get messy.
With that in mind, here are six tips to help 20-somethings pay off student debt (or at least get started on the right foot).
1. Get Organized
Before you make any plans, you have to get organized financially. I’m not talking about a budget (but that helps and we cover it later). I’m talking about simply figuring out what you owe, what you have, and where everything is located.
The average college graduate has 5 different student loans. One for every year of college, and maybe an extra for a summer semester or extra year. If you’re lucky, all five of your student loans are at the same loan servicer. But most people aren’t that lucky. They may have one or two loans in different places.
So, when you get out of school, you need to track down your student loans AND make sure all your information is up-to-date. Think about it: does your address when you were a freshman still match where you’re at today? For most people, that’s a no.
Also, make sure you have an up-to-date login for your loan servicer’s website, and NEVER use your school email address (some colleges turn off graduate emails after about 6 months). Make sure that you’re using your “real” adult email address.
If you’re having trouble finding your student loans, check out this full guide: How To Find Your Student Loans.
2. Find The Right Repayment Program
Now that you’re organized with your student loans, you can make a smart decision on the best repayment program.
What is the “right” student loan repayment program for you? It’s the one that you can afford to make the monthly payments on each month without fail.
There are a lot of options – and the default is one of the highest monthly payments: the standard 10-year repayment plan.
If you’re struggling on that plan, consider an income-driven repayment plan, such as IBR, PAYE, or RePAYE.
If you don’t know which is best, consider using a tool like Chipper that will analyze your loans and help you find the best repayment plan. You can also check out our full guide on Selecting The Best Student Loan Repayment Plan here.
3. Look for Student Loan Forgiveness Programs
Did you know that there are over 80 different programs and options to get your student loans forgiven? Seriously!
Right now, today, there are multiple Federal and state-based student loan forgiveness programs that could help you eliminate some or all of your student loan debt. And this is without any changes from President Biden.
But these programs don’t give you student loan forgiveness for nothing. They all require some type of commitment, work, application, or other “sacrifice” to get your loans forgiven.
For example, one of the best programs available right now is Public Service Loan Forgiveness. This program provides complete, tax-free, student loan forgiveness if you work 10 years (120 payments) in a public service profession and make qualifying payments during that time. Any balance at the 10-year mark is forgiven. That’s awesome!
If you have student loans, you owe it to yourself to do your homework and see if you qualify for any type of loan forgiveness. We estimate that roughly 50% of borrowers qualify for something – don’t leave free money on the table.
4. Live At Home
According to a recent survey, 52% of young adults live with their parents.This is up from 46% in 2019. While some may not think living at home as a great thing, depending on how you use your time (and money) while living at home, this could be the springboard you need for financial success.
Think about it: if a person owes $25,000 in student loan debt, he or she can pay it off quickly when living at home. Paying off $25,000 is roughly $1,043 per month for 24 months. That’s less than the average 1-bedroom rent in the United States (fun fact – that number is $1,098 per month).
Again, while this is not fun, it is a quick way to knock out the debt for good. It simply all depends on how you use your money while you live at home.
5. Earn Extra Income
This idea sometimes gets a lot of flack – people shouldn’t “have” to make extra money outside of their day job to afford their loans. And maybe you’re right – but in reality, there are two sides to the personal finance equation: income and expenses. You can boost your income or lower your expenses to achieve your financial goals (whatever they may be).
And let’s be honest – most young adults have more free time than they realize (especially pre-family). When working a “real job”, most will come home from work at at five or six each evening. Or right now – you may be working from home anyway!
To take advantage of this free time, you could try to work as a waiter or bartender at night. When doing so, you can easily make a few hundred dollars extra per week. With this money, you can pay off your debts and quickly knock out the loans.
Don’t want to get a second job? You can also pick up a variety of side hustles to boost your income. There are so many side hustle opportunities where you can earn an extra couple hundred dollars per month. That may not see like a lot, but it can go a long way to help you pay off your student loans.
Don’t know where to start? Check out out list of the Best Side Hustles Right Now.
6. Get Your Budget Right
I’m not a huge fan of budgeting, but you have to at least get the basics of your budget right – you can’t spend more than you make and expect to pay off your student loan debt.
A key to this is simply getting the basics of your budget right. Depending on your personality, this could be very detailed, or high level. But you need to think about what works for you.
You should also think about what tools you want to use to budget – again, based on your personality. Do you like to use apps? Are you a pen and paper type person? Maybe you’re a spreadsheet guru?
Depending on your style, you need to find a budgeting tool that works for you. With your budgeting tool, you can craft a budget and monitor your spending so that you make progress towards your financial goals.
Final Thoughts (And Bonus Tip)
When it comes to paying off your student loan debt, there’s no magic bullet. You need to make a plan, and execute the plan. The plan could income various forms of programs and tactics.
But here’s the bonus tip – you can combine some (or all) of the tips above to make progress. Nothing here is either/or. In fact, you should be doing all of the above.
Find a repayment program that works for you? Yes. Along with earning more money and cutting expenses? Yes. And living at home while doing it? Yes.
By putting all these tips into practice you can get out of student loan debt much faster than you ever thought possible.
Do you have any other tips to help young adults get out of student loan debt?