Hello! Today I want to talk about something that nearly every college student has to deal with at some point. Student loans. As a fresh graduate, it can be easy to pretend that they don’t exist. You get 6-7 months before you have to start paying them back, so it’s easy to get blindsided when suddenly payments start.
In order to prevent that, you have to be prepared. You can’t just look away and hope they won’t exist when you look again (trust me I tried). Although I’m still in the midst of figuring out my own plan, I wanted to share with you how I’m planning to deal with my student loans now that it’s time to start paying up. I’ll also be sharing advice on how to minimize your student loan debt in the first place.
*This post was sponsored by Frank Financial Aid, the story and all opinions shared are my own.*
My Student Loan Story
Just like many others, I knew from pretty early on that I would need to earn scholarships and take out loans to afford college. My parents helped me as much as they could, but that didn’t include tuition or room and board. I was fortunate enough to earn a pretty hefty scholarship through the honors college of my university, but despite that, out of state tuition hit me hard. I had to take out loans to pay each semester.
Honestly, it could have been a lot worse. I ended up taking out about $30,000 of student loans. They collected interest while I was in college, so now that number has gone up about $3,500. As much as I wish I had made some different choices and prevented myself from going into debt, it is what it is.
At first, I had no idea where to begin. There was a bunch of terms I didn’t understand, and different types of payment plans and all this advice for which plan is best. I was confused. After research and lots of reading, I began to develop my own pay off plan.
My Debt Pay Off Plan
Ever since graduating, I’ve been thinking a lot about paying off my loans and getting out of debt. I’ve read some great blog posts about it. Two sites I really love are this post by Kelsey, at On My Way to Happiness. If you are needing some money inspiration, check out her blog! The other is this page at withfrank.org, which teaches you all of the basics for paying off your student loans. I’ve also discovered a whole debt free community on instagram, which has been super helpful for ideas and inspiration. A lot of the ideas I found there are similar to Dave Ramsey’s baby steps, although I won’t be following them 100%.
So, here’s my plan for getting out of my debt ASAP.
- Budget my money each month. I’ve developed a mock budget for once I start my job, and after totaling up all my income and expenses, I should be bringing in about $400 extra a month with my teaching position. The purpose of the budget is to make sure you know where all your money is going each month, so you are in control.
- With that extra money, I’ll be doing a couple things. First of all, I want to build up a $1000 emergency fund, so I’m sure I have money to cover any issues that arise. I want to feel comfortable sending all my extra money to debt.
- Then, I’ll be doing what’s called a debt avalanche. That means I will pay off the highest interest rate first. Each month, anything extra I bring in will go straight to debt, cutting down the principal each month.
- For me, the highest interest rate is my credit card. I have a card that has built up a balance of around $5000 during my college years. Another mistake, but one I need to work with now. The other option is debt snowball, where you pay off the lowest balance first to decrease your payments and therefore increase the amount you can pay faster. Do some math and figure out which method will get you out of debt fastest.
- Once I get my credit card paid off by sending all of my extra money to it, I will switch to my car loan. I haven’t bought a car yet, but I intend to within the next few months. My car has no air conditioning and honestly could stop working at any moment. I work in a pretty dangerous area, so it is important to have transportation I can trust. It feels weird to think about taking out even more debt, but it isn’t really an option at this point.
- The final step will be my student loans. The biggest portion of my debt, but also the lowest interest rate. I am saving these for last, but that doesn’t mean I won’t be making payments (to the tune of $350 a month). I’m also saving them for last because as a teacher in a low income school district I qualify for some loan forgiveness after 5 years. I want to utilize that! I’m hoping that 5 years from now, I will have paid nearly everything off and the loan forgiveness will cover the last of it.
I don’t know about you, but I don’t want to still be in debt when I turn 30. Even if I have to put in some extra work for a few years, I think it will be worth it in the end.
How else will I be working to pay off my student loan debt sooner rather than later?
- Side hustle! I will likely be working part time at a restaurant while on my debt free journey. During the school year I will work a couple shifts a month, and during the summer I will work as much as possible. I say likely because I just interviewed and haven’t heard back yet, but I think it is going to happen. Any money I make from the restaurant would go straight to debt, as my main income covers everything else.
- Cutting costs. I have been doing this for a long time wherever possible, but we will be even more intentional about it now. We pretty much only shop at aldi. Plus, I have been practicing meal planning and shopping so we have no food waste. We are also trying to find ways to cut down on other bills, such as cutting cable, sharing netflix (thanks dad!), and turning off lights.
- Little things add up. During this time I will also be working to bring in little wins to go towards debt. I’ve already started doing this, but I will be selling items on facebook marketplace, using ibotta (that’s my referral link) to save some money on groceries, and using an app called field agent.
Now that I’ve shared my story and plan, I want to share some advice for borrowing smarter, and avoiding taking out quite so much debt in the first place!
Related: How to Save Money on Groceries
How to Borrow Smarter
Once you decide on the school you want to attend, you have to figure out how to pay for it. Unless you can cover the costs in other ways, student loans will be essential to this process. The first step of getting student loans is filling out the FAFSA. You have to do this while you are still in high school and re-file it every year, so pay attention to deadlines!
FAFSA is kind of a mess, and was always incredibly confusing for me to fill out (even with the help of my mom, who works in finance.) It can be easy to make a mistake, or fill something out wrong, and that can affect how much you end up paying in interest!
By filling out FAFSA correctly, you can make sure you are getting the most free or reduced interest loans! Fortunately, withfrank.org can help with this. They have a whole FAFSA guide, as well as a completely free and secure tool (find it here) that makes filing so much easier. They do all the hard work for you, and ensure you get the maximum savings. Who wouldn’t want that? Honestly if I had known about this website before graduating, I 100% would have used it. I hate filling out forms, and any tool that makes it easier is a win in my book.
Don’t just trust your school financial advisor when they tell you how much you need to take out. Do your research, be careful, and make smart decisions.
Reducing the Student Loans You Take Out
If you are still in high school, NOW is the time to start saving for college. Fortunately my mom was very money conscious and always encouraged me to save money for college. By the time I went to college, thanks to part-time jobs, gifts, graduation money, and 4-H, I had over $10,000 saved. It seemed like a lot at the time, but when your tuition is $38,000 a year it doesn’t go as far as you hope. Here are some ways to reduce the amount of loans you take out for college:
- Work a part time job in high school and SAVE. Most of my friends in high school had jobs. Most of them spent their paychecks every week, despite having almost no expenses. Don’t blow all your hard earned cash! I opted not to work during the school year, and work full time during the summer. Do whatever works best for you.
- Choose the right school. If you really hate loans, you might have to give up on your dream school, at least at first. Maybe it would be better to attend a community college for a short time and transfer to finish your degree. You can also consider being a guest student at a community college. I didn’t know about this until my junior year, when I had to utilize it in order to graduate on time. As a full time student at Ball State, I was able to easily register for some entry level classes at a local community college and take them at the same time as my other classes, at a much lower cost. If I had done this from the beginning, I might have even been able to graduate early!
- Work while in college. I wish I had gotten a job my freshman and sophomore year. At the time I thought I was way too busy (I wasn’t). I only worked my junior and senior year (when the classes are harder). If I had worked the first two years, I would have had to take out less loans in the long run!
Final Thoughts on Student Loans
As much as I dislike being in debt and spending so much of my paycheck each month on my student loans, I do not regret for a moment the education I received or the travel I did while in college. Overall I don’t regret taking out my loans, I just wish I had borrowed a bit smarter.
I’m no pro on saving money and getting out of debt. I am, however, very passionate about it and excited to learn more. If this is something that interests you, I recommend checking out the debt free community on instagram! Or just send me a message! I would love to chat.