2020 hasn’t been the year most of us had in mind – especially when it comes to finances. The economy has struggled while many have lost jobs.
There is one big silver lining for those with student debt: interest rates have been waived through the end of the year. That’s right, in an effort to provide relief to student loan borrowers during COVID-19, interest is being set at 0% through December 31, 2020.
This interest slash means that your student loan payments go directly to paying off your principal, which is enormous if you have high-interest rates or a large amount remaining. You can make a dent in your remaining debt now through the rest of the year. Here are five ways to make serious progress.
1. Make a Plan or Follow a System
You’ve got to have a plan. It’s not rocket science – but it can be challenging to sit down and devise a strategy for paying off your student debt. You need a debt to success system.
Pull out the pen, paper, and budget and chart your path to success. Make a plan and get some accountability to stick with it. Without one, you’re likely to slide, become passive, and delay. If this has been you, let the slashed interest rate be your motivation to get started.
2. Budget Like Your Life Depends on It
Your budget is the linchpin of your success. Budget well, and you’ll be paying the maximum possible each month. Budget poorly, and you may not be paying off a cent.
There are plenty of tools out there to help. Mint, YNAB, and EveryDollar are just a few that could help you budget well.
3. Make Sacrifices
Once you’ve got your budget locked in, it’s time to make some cuts. It’s not fun to think about what expenses you can eliminate – but it’s well worth it. Take a look at your lifestyle and make a list of everything not vital to your life.
Consider cutting out TV/streaming subscriptions, eating out, unnecessary clothes, alcohol, etc.… Make some sacrifices.
4. Find an Extra Source of Income
Making sacrifices can help you cut expenses. But perhaps the most practical way you can make progress on your student debt is to make more money. Now may not be the best time to pick up a part-time job at a restaurant or coffee shop, but thankfully you have other options.
You could deliver food or groceries while many continue to keep their distance. You could become an Uber or Lyft driver as people begin getting out more. You could even look for online freelance or gig work on sites like Fiverr or Upwork.
5. Consider Refinancing
Student loan rates have dropped big time for new borrowers in 2020, but unfortunately, this doesn’t apply to existing borrowers. However, existing borrowers could refinance their student loans into a private loan to take advantage of the current market’s low-interest rates.
This route can be complicated, as refinancing into a private loan means deferring any federal benefits. So it may be a better option in December than it is right now. Talk to an expert to see if this tactic might make sense for you.
Take advantage of this interest rate situation if you can. Your future self will thank you.
