7 Ways To Pay Off $100,000 in Student Loan Debt in Under 5 Years
When it comes to student loans, 7% of borrowers in the U.S. owe more than $100,000, accounting for one-third of the country’s total of $1.6 trillion.
It’s true: student loan debt is considered one of the “best” kinds of debt because it signifies an investment in higher education and can have a positive impact on your tax burden and credit score. Nevertheless, being saddled with large monthly payments can curtail your ability to achieve other financial goals, such as buying a home or saving for retirement. In addition, paying interest on student loans over the long haul can be very expensive.
So, what can you do? One option is to pay student debt off as fast as possible.
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Research Your Options
Studentaid.gov has a simulator you can use to find the best repayment strategy. This is a good place to start to get an overview. You’ll be guided through several steps to input your loan information. You can also enter your primary repayment goal, whether it’s “pay off my loans as fast as possible,” “have a low monthly payment” or “pay the lowest total amount over time.”
Choose “pay off by a certain date” and select five years as your goal to see what your monthly payments would be.
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Start With Your Employer
“Borrowers often overlook the ability for their employers to help with student loan repayment,” said Patricia Roberts, author and COO at Gift of College. Ask if your employer offers a student loan repayment benefit, or if they’re willing to consider it. Programs like these are win-wins.
Roberts said, “Some employers do not even realize that the CARES Act of 2020, as amended, allows for them to offer $5,250 per employee per year in tax-free student loan repayment assistance through January 1, 2026, unless further extended. That’s $10,500 in support that can be provided this year and next.
“In addition to no payroll or income tax being owed on these payments, employers can take a business tax deduction for payments made.”
Kerrie Carden, CEO of Equip Advisory warned, however, that choosing a toxic work environment just for this perk can backfire.
“Be concrete about the why,” Carden said. “For example, ‘I’ll stay in this job for three years so that my loans can be forgiven. I’ll do the following things to support my mental and emotional health during that time so that I have the energy to stick with this goal.'”
Apply for Loan Forgiveness
If you work in certain industries, for example in public education, you can qualify for Public Service Loan Forgiveness (PSLF) after a certain number of years of paying off your loans.
In addition, loan forgiveness may be a reason that you choose to forgo paying off your loans in five years. The Saving on a Valuable Education (SAVE) and Income Based Repayments (IBR) plans include generous forgiveness amounts if you make regular payments tied to your income for 10, 20 or 25 years depending on the plan and the amount you borrowed.
These plans may be best for those who qualify for Public Service Loan Forgiveness (PSLF) or who are committed to working in lower-paying industries over the long haul.
Tighten Your Budget and Add a Side Hustle
Joe Camberato, CEO of National Business Capital, emphasized that for most student borrowers, youth is an asset.
“Work like crazy,” Camberato said. “When you’re young and full of energy, use that to your advantage. I worked as much as I could at my day job and picked up any side gigs available. All the extra money went straight to paying off my debt.”
Camberato said that even on a limited income, smart budgeting is key — as is self-restraint. “It takes real discipline and sacrifice to manage your money and lifestyle.”
Becoming debt free sooner allows you to start saving and investing sooner, so you can tap into the magic of compound interest.
Engage Family and Friends
Roberts said that family and friends can be called upon to support your journey.
“Let’s face it. No one really knows what to buy you for birthdays, holidays and other special occasions,” she said. “Now is the time to get real with those who love you and let them know that any level of support with student loan repayment would go a long way in lessening the financial and emotional weight you are carrying.”
Consider setting up a basic crowdfunding campaign and sharing your story in an authentic way. Other platforms — like Roberts’ own GiftofCollege.com — allow you to set up a profile and share a link so that people can contribute.
Your community can also provide resources to reduce your budget. Need to move some furniture? Rather than renting a van, Carden suggested tapping friends or neighbors to help.
“Leveraging — and sharing — your community resources puts money back in your pocket while strengthening your social supports, a key to creating intergenerational wealth.”
Consider bartering for things like childcare or even personal services.
Pay Extra Whenever You Can
Even small amounts above your monthly minimum can make a difference, as they go directly towards the principal of your loan. You can also decide ahead of time that any unexpected windfalls you get will go directly to your loan repayment, so you’re not tempted to spend that inheritance from your great aunt on something you don’t need.
Advocate for Student Loan Reform
Groups like the Debt Collective have been organizing for years to reform the student loan system and release borrowers from predatory lenders. Whether you join or simply contact your elected officials, make your voice heard.
No matter what, remember to take pride in your education. Remember, when you took out your student loans in the first place, you made a commitment to a better future for yourself.
As Carden said, “I know it can feel intimidating, but it is definitely possible to pay off $100K in student loan debt in five years with a plan.”
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This article originally appeared on GOBankingRates.com: 7 Ways To Pay Off $100,000 in Student Loan Debt in Under 5 Years