Tips For Paying Off A Student Loan On A Tight Budget
Updated on July 9, 2020
Many people are underemployed and do not have access to full-time employment. However, this does not necessarily mean that you won’t be able to pay off your student loans. While it can be difficult to pay off your debt if you are on a tight budget, these tips may be able to help you do it:
1. Make sure that you set money aside for student loans each month
If your budget is tight, it’s best to set some of your paycheck aside in a separate account to pay your student loans. This can be an effective way of making sure that you do not spend it on purchases during the month.
2. Realize that you’ll mostly be paying interest early on
You’ll be paying more interest early on in the repayment of your loan, which means that making extra payments early on in the term of your loan isn’t always the best strategy. However, making extra payments later on in the term of your loan can be advisable. That’s because these payments will reduce the principal of the loan more, which means that they’ll reduce the amount you owe.
3. Always make your payments on time, and don’t ignore any missed payments that you owe
Making sure that you pay your loans on time each month plays an important role in protecting your credit score. This can allow you to be eligible for refinancing programs that can allow you to pay less interest on your student debt. If you owe back payments, it will do damage to your credit score if it goes to collections. Not only is it important to pay your student loans on time and quickly pay any past due payments, but it’s important to follow the same protocol with other forms of debt, such as credit card debt.
4. Consider an income based or income contingent repayment plan
An income-based or income-contingent repayment plan can allow you to spend less on your student loans each month. While the principal of your loan will not be lower, these repayment plans divide the loan over a larger number of payments. Your interest rate will not change if you switch payment plans, and it’s possible to switch payment plans at any time.