Published in: Student Loans | July 8, 2019
How to Pay Off Your Student Loans in 5 Years or Less
By: Maurie Backman
Getting out of debt quickly is possible. Here’s how.Image source: Getty Images
If you took out student loans to cover the cost of college, you were no doubt in good company. But now that you’re staring at a whopping balance, you may be wondering how long it’ll take to get out of debt and move on with your life.
The truth is that it takes some people decades to shed their student debt -- but that doesn’t need to happen to you. In fact, if you’re willing to make some sacrifices coupled with smart decisions, you just might manage to rid yourself of student debt in five years or less.
1. Keep your big expenses to a minimum
Most of us have a few expenses that eat up more of our income than any others -- namely, housing and transportation. Keeping these costs down can free up cash that can go toward your outstanding loan balance.
Imagine your rent costs $1,000 a month right now. Renting a cheaper place for $600 a month will put an extra $4,800 a year in your pocket. Meanwhile, if you’re paying to own a car but live somewhere with public buses and trains, giving up that vehicle could easily save you a few hundred dollars a month as well. And again, that’s loan repayment money for you.
2. Cut back on leisure spending
While keeping your major expenses low will help free up cash to pay off your student loans, smaller expenses can add up, too. Spending cautiously in areas like restaurant meals, cable, streaming services, and live entertainment can really make a difference as far as your loan payoff efforts go. For example, if you’re able to save an extra $200 a month by limiting all of these things, you could put that money into your loan and knock it out sooner.
3. Get a second job
The more money you earn, the more opportunity you’ll have to chip away at your loan balance. That’s why getting a side job is a great idea. The money you earn from it won’t already be allocated to existing expenses, so once you pay your taxes on that income, you can use the remainder to pay down your student debt quickly.
4. Refinance to a lower interest rate
If you took out federal loans for college, then chances are they came with a reasonable interest rate. That’s because federal loan interest is capped to ensure that it’s affordable. If you borrowed privately for college, however, you may be stuck with a much higher interest rate, and a higher monthly loan payment to boot. A good solution, therefore, may be to refinance your loan to one with a lower interest rate. Doing so might lower your monthly payments substantially, and from there, you can take the money you’re saving and apply it to your loan’s principal to pay it down sooner.
5. Find an employer who will help you pay off your debt
These days, a growing number of companies are offering student loan repayment assistance as part of their workplace benefits. Finding an employer who’s willing to do the same for you could shorten your repayment period significantly.
That said, companies that offer this perk generally require workers to commit to remaining employed for a certain period of time or otherwise return the money they were given for loan repayment purposes. If you’re taking a job solely to reap this benefit and are planning to leave the second your loans are gone, you may want to rethink that strategy.
Paying off student loans in five years or less isn’t an easy thing to do -- but it can be done, especially if your loan balance isn’t that high to begin with. The key is to commit to that goal early on, map out a loan repayment plan, and stick to it.
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