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Student loan debt is a topic on many people’s minds in the United States.
The cost of receiving a college or university education has gone up three times faster than other school expenses.
The majority of students who want to go to college pay some or all of the costs by taking out student loans.
The theory is student loans are “good debt” because you’re investing in your future and you’re increasing the likelihood you’ll land a desirable job and make a high salary.
While college may improve your earning potential, it doesn’t necessarily happen overnight.
The cost of living is also rising in many places faster than earnings.
This leaves people stretched thin in terms of their finances, whether their income is low or they’re spending a lot on their living expenses.
What happens if you take out student loans, and when it’s time to pay them back, you aren’t making a lot of money, or you have other expenses that quickly erode your income?
If you have a relatively low income currently, you may feel like you can’t get ahead of your student loans. It can feel like you’re never going to pay them off, or perhaps even worse you could be at risk of default.
There are ways to get out of your student loan debt on a low income, but you have to be strategic, make sacrifices in certain areas, and also be proactive in your approach.
How Much Student Loan Debt Do People in the U.S. Have?
Americans as a whole now owe more than $1.53 trillion in student loan debt. This debt isn’t just held by younger Americans who are recent college graduates.
There are borrowers who hold a portion of this debt and have been out of school for ten years or more.
The standard repayment term for federal student loans is ten years, but for most people who have a four-year degree, it takes them closer to 20 years to repay loans.
1 in 4 Americans are holders of student loan debt, and the average loan payment is $393 a month. The average total student loan debt amount is $37,172.
Only 13 years ago, the average debt load was only $20,000.
Other statistics related to student loan debt in the U.S. include:
- Undergraduates pay 20% more on average for a college education than they did just a decade ago.
- The average amount of loan debt among Generation X is higher than the national average at $40,000, and this could be because younger borrowers will still borrow more or don’t owe as much in interest.
- People in Washington, D.C. and Maryland have the highest average student loan balances. The states with the lowest averages include North and South Dakota and Wyoming.
- People with debt have four loans on average.
- More than 13% of people in the U.S. have at least one student loan balance listed on their credit report.
- In 2016, 8.1 million Americans stopped paying their federal loans for at least nine months—this means around one in six with federal debt were on the path to default.
The Effects of Student Loan Debt
There are a lot of challenges having student loan debt can bring to your life and your sense of well-being.
For example, one of the biggest financial effects of the student loan debt crisis is that people often can’t save an emergency fund or prepare for unexpected expenses.
A survey from Nitro found 41% of respondents with student loans wouldn’t be able to afford an unexpected $400 bill.
Fewer respondents said they would be able to cover the costs of a medical emergency or home repair, both of which can cost thousands of dollars.
Other effects of carrying student loan debt are:
- A report from the nonprofit organization Student Debt Crisis found 80% of survey participants felt their student loan debt prevented them from putting aside retirement savings.
- 56% said they weren’t able to buy a home, and 59% said they were prevented from making large purchases due to student loan debt.
- 86% of respondents cited student loans as a major source of stress, with one-third saying it was their number one stressor.
- 65% of people who participated in the study said their student loan payment each month was more than what they spent on food, and 56% said it was more than their health insurance.
Average Salaries for U.S. Workers
The student loan debt crisis has been difficult to deal with for many people for different reasons. First is the rising cost of college, leading them to take out more loans than students did in the past.
There’s also the fact that even though unemployment is low, the cost-of-living is rising faster than wages in many places. It’s challenging for many people to keep up with their expenses, even with a college degree.
A survey from BLS recently showed that despite the challenges of paying for college, it does remain valuable to earn more money.
For U.S. workers 25 and older without a high school degree, the median annual earnings for the first quarter of 2019 was $30,056.
This went up to $38,428 for high school graduates, and for college graduates with a minimum of a bachelor’s degree, the earnings were $70,200 annually.
That’s quite a jump, but if you’re living in a big city where there are more high-paying employment opportunities, you’re still going to be putting much of your salary toward your living expenses.
All of this leaves many people wondering how to pay their loans on a low income, or how to pay them when they have a lot of other expenses.
Paying Off Student Loans Faster—Even If You’re Broke
When you have student loan debt, you want to ensure you pay it off as quickly as you possibly can so you take that weight off your shoulders and you can move forward in your life.
Go Over Your Debt and Your Finances
Before you can create a workable debt-repayment strategy, you have to do the hard part.
What’s the hard part?
Sitting down and looking at what you owe, what your income is, and what is going out versus coming in.
There is no way to develop any realistic strategy or plan for student loan repayment without being honest with yourself and having a clear idea of what you’re facing.
Along with student loan debt, you’re also going to want to include other forms of debt like more toxic sources such as credit card balances.
Create a Budget
Many of the worst effects of debt are related to the fact that it’s emotionally overwhelming to deal with.
This is true of any kind of debt, but if you can take control and empower yourself, you’re going to reduce some of that anxiety you feel about your student loans and your finances in general.
Even if you’re only making $35,000 a year, you can effectively pay off your student loan debt if you can be smart with your budget and make lifestyle changes.
When you’re creating a budget, whether it’s geared toward paying student loan debt or not, consider the following:
- Prioritize your debts. If student loan debt is your only obligation, this part will be easy. If not, you may need to focus on other areas of debt repayment more heavily and get those off your plate before you really tackle student loan debt. For example, if you have high-interest credit cards, you may need to start there.
- Track all of your spending. This will help you see where you can make changes. You may be spending unnecessarily in places that you could eliminate without diminishing your quality of life. For example, if you’re eating lunch out every day when you see the numbers, you might realize you could save $100 a month to put toward your student loan payment.
- Write down everything that you absolutely have to pay each month and then categorize your spending that’s not set but still has to be included like food and transportation.
- Compare this against your income and see what, if anything, you might have leftover based on your new budget to dedicate to student loan debt.
There are mobile apps and different types of technology you can turn to to help you save money and stick to a budget.
Some helpful options if you want to reduce your monthly spending and put more toward paying off student loans quickly include:
Truebill is a great financial management app that lets you get complete control over your finances.
The Truebill app helps people find and cancel unwanted subscriptions, receive refunds on fees, and reduce their bills.
Truebill is a financial control center according to their marketing.
There are unique features not available with other financial apps.
For example, there are options to connect your bills by logging in or taking a picture, and then Truebill negotiators get to work to find discounts you may not have realized were available and promotional rates available to you.
The team can negotiate better rates and get one-time credits applied to your account without reducing the service you receive or downgrading it in any way.
YNAB is a budgeting and personal finance platform. There is an online version, and also several different apps available from YNAB.
YNAB’s tools and platforms follow their “Four Rules,” and budgeting and spending information can easily be shared with your partner thanks to real-time information on any device.
YNAB includes goal tracking so you can include paying off student loan debt as one of your primary goals, and also reports in graph and chart form so you can see the financial progress you’re making.
Debt Payoff Planner & Tracker
The Debt Payoff Planner & Tracker App is good to help you get a handle on any kind of debt, including from student loans.
Many people feel this app helps a create light at the end of the tunnel.
With the app, there is a timeline created to show you how long you’re going to be paying off your student loan debt, and it offers step-by-step instructions to pay off debt.
With this app, all you have to include for a customized, realistic debt repayment schedule is the balance of your loan, the APR, and your minimum payment.
You can also opt for a debt snowball strategy or the debt avalanche strategy, as opposed to a custom strategy.
The Debt Payoff Planner and Calculator can be used to track payments too, so you stay on top of everything and don’t miss any payments.
ChangED is a mobile app geared specifically toward helping you pay off your student loans faster even if you’re broke or don’t make a lot of money.
According to the creators of ChangED, you can save more than $10,000 if you make additional payments on your student loans regularly.
First ChangED looks at your spending and analyzes it.
Then, when you make a purchase, it’s rounded up and the change from that round-up is transferred to your ChangED account.
When the balance in your account reaches $100, ChangED automatically sends a payment to your loans.
This alleviates the need to have to create a follow a strict budget.
ChangED has a personal dashboard so you can check and see the payments you’re making and your progress, as well as what you’re saving on interest.
Undebt.it is a free personal finance tool where you can manage different types of debt accounts and choose from either custom repayment plans or other types of plans.
You can see your projected payoff date as well as the total interest you’ll end up paying as well.
There’s also a unique feature that lets you make extra single payments when you’re able so you can make the process of repayment even faster.
When payments are made, and you add them to Undebt.it, your balances and payoff dates are adjusted accordingly.
Earn Extra Money
You may think earning extra money is easier said than done, but with the gig economy flourishing it’s easier than ever before to earn money while still working at your full-time job.
You don’t even have to earn much extra money to be able to make a significant dent in your student loans.
If you were able to only earn a few hundred dollars extra a month, that could reduce your payoff timeline quite a bit.
So how can you earn extra money?
The specific route you take might depend on your talents and interests, but ideas include:
- Online tutoring on a site like Tutor.com can be a good option to work a flexible schedule. Online tutoring jobs can range from helping students in the U.S. with homework and test prep to helping international students learn English.
- Take surveys. You can get paid to give your opinion on online surveys, and it’s one of the simplest ways to earn extra money. The main downfall is that many surveys want specific criteria in their respondents, but you can pick and choose the options that will work for you. You aren’t going to get rich taking surveys, but it can help you pay off loans faster.
- Go to a user experience platform like You can test websites for user-friendliness and other specific features, and you get paid for your feedback. If you work through UserTesting.com, just to give an example, you can earn $10 on PayPal for each 20-minute video you’re able to complete. You visit not only websites but also use apps, and then you complete the tasks asked of you and verbally share your thoughts.
- If you love to take photos, there are certain sites that will pay you to use them. Foap is just one example. You can sell your content, and whenever someone buys it through Foap, you make extra money.
- Deliver groceries or packages. You may already know people who drive for rideshare services to earn extra money, but this isn’t necessarily for everyone. For example, you may not enjoy the idea of having strangers in your car, or perhaps you live in an area where Uber or Lyft aren’t that popular. You can still drive and earn money by delivering groceries or packages. Shipt is one example that pays people to shop and deliver groceries. According to Shipt, you can earn up to $22 an hour by shopping for groceries and household items and then bringing them to the people who have ordered them.
- Advertise on your car for businesses and earn money. Wrapify is a platform that lets you potentially earn hundreds of dollars a month according to their site. Your car is wrapped with advertising when you’re matched with an advertiser in your area, and you can make more money by having more coverage on your vehicle. Might sound strange, but also an easy way to earn passive income.
- Sign up for TaskRabbit and do different chores or household tasks for people. TaskRabbit is a platform where you can go to find people who will do everything from cleaning your home to putting together furniture. If you want to help people but maintain a flexible schedule, you can sign up to be what’s called a “Tasker.” You have the flexibility to choose not only your schedule but your jobs and your rates.
If you’re paying a lot in interest on your various student loans, which can especially be the case on private loans, consider refinancing.
Refinancing student loans isn’t going to reduce what you owe, but it can give you one, streamlined payment, and a lower interest rate.
If you’re thinking about refinancing student loans, there are pros and cons.
First, what is your credit score like?
If you’re just starting out and you have a limited credit history or your credit score isn’t great, refinancing probably isn’t the right option for you.
When you refinance, you will have to be approved as you would with any other kind of loan.
However, if you do have good credit and can get favorable terms, there can be benefits.
As an example, if you were to refinance $40,000 in loans and you received a competitive 4% interest rate instead of your existing 6%, you would save around $5,000.
Be aware if you have federal loans and you refinance them, you may lose certain protections such as income-based repayment options.
Should You Do Income-Driven Repayment?
If you have federal loans, you may have weighed whether or not income-driven repayment is right for you.
There are a few different types of income-driven repayment, which are:
- Revised Pay As You Earn (REPAYE)—With this plan, your payment is maxed out at 10% of your discretionary income. Your repayment terms are extended to 20 years for undergraduate loans, and 25 years for graduate loans.
- Pay as You Earn (PAYE)—These plans cap your payments at 10% of your income, but they can’t go beyond what your plan would be with standard repayment, and the repayment term is 20 years.
- Income-Based Repayment (IBR)—For this plan, you have to be a borrower after July 2014, and your payment cap is 10% of your income. Terms are 20 years.
- Income-Contingent Repayment (ICR)—An ICR plan has two primary options. You either pay 20% of your discretionary income, or you pay what you would with a fixed plan for twelve years.
If you’re making an entry-level salary, these plans can help you stay afloat with your payments.
You may need one of these plans for a period of time, but be aware of possible downsides.
For example, these plans can be expensive because you’re receiving an extended repayment period and paying interest throughout.
If it’s possible to make your payments in other ways, you should probably choose those as opposed to an income-driven plan, but if you absolutely can’t do it, they are a viable option.
Paying off student loans is a huge challenge. Regardless of your income, it requires patience and commitment.
If you’re working with a low income, prioritize paying off your student loan debt, make a concrete plan, and adjust your lifestyle accordingly to pay them down faster.