With students carrying an average of nearly $30,000 in student loan debt upon graduation according to a report from the Institute for College Access and Success, many are left wondering how they'll payoff their loans. There are numerous repayment options for students. Sorting all of the interest rates, payments and scheduling can be tedious and can add to a borrower's stress if they don't fully understand the details of their loans. Melanie Locket, a blogger at Deardebt.com took us through her student loan debt deduction journey; paying off $80K in student loans on a $30K salary. Here's how she's doing it.
1. "I gave myself a debt reality check"
After graduating, Melanie only paid the bare minimum on her student loans. It was only until she created a Mint.com account to track her cash flow did she realize the severity of the situation. Seeing the numbers in plain, bold print gave Melanie the push she needed to come up with a sound strategy to pay off her debt.
2. " I took control of my finances"
Melanie knew that only she could take control and improve her financial life. She took any extra cash she had and put it towards her debt. Facing $80K in debt, with a $30K salary, she didn't make excuses for herself and found practical ways to stretch her dollars. Living a frugal, minimalist life helped her prioritize her debt and future travel plans.
3. "I worked more, and paid off more debt"
By late 2013, Melanie paid off $16K in debt. With such a tight budget, Melanie say's she owes her big bite out of debt to her side hustle, a flexible side job that that bought in some extra cash. Side hustling also allowed her to learn new skills, test drive a different career and meet new people.
In the past six years, Melanie has paid off $37K, and paying off more than half in less than three years. With $43K to go, she's almost at the halfway point out of her $81K total. Her biggest tip to borrowers is to keep going, stop judging yourself and to trust the process.
Click through the photos below to learn more ways to put more money in your pocket.
Easy ways to put more money in your pocket
How to pay off $80k in student loan debt on a $30k salary
Automate your finances.
Set up your finances so that money is taken straight from your paycheck and deposited directly into your savings account or a retirement savings account. You can also set up your fixed bills like your Internet and cable to be automatically deducted from your checking account. Automate your finances to save time and prevent overspending. If you see extra money in your account, chances are you’ll find a way to spend it, leaving you little to invest in your future. Automation helps keep your priorities in line so that as money comes in, it is dispersed to your other accounts immediately.
At least twice a year, look at your expenses line by line and see if you’re getting the most bang for your buck. For example, do you read the magazines you subscribe to or maximize that gym membership? If the answer is “no,” consider canceling or negotiating a better rate. Take that money you save, and apply it toward bigger payoffs like debt reduction, retirement or an emergency fund.
Lots of people use debit cards to make it easy to buy and budget for groceries, gas and other routine purchases. Instead of doing that, look into a credit card with a great rewards program for those daily purchases, and set it up to automatically pay the statement balance from your checking account each month. Over the course of the year, you could potentially pocket a few extra hundred dollars just by using a card with a good rewards program instead of your ordinary debit card (just make sure you’re paying off your credit card every month, so you don’t pay extra in interest).
Boost your income.
If you love your job and want to grow your career, it's time to think about boosting your income as well. Make it a goal to negotiate a raise this year. Consider your strengths and look at the value you've provided to your company over the last six months to a year, and discuss it during a performance review. This can feel intimidating, but it never hurts to ask.
Get a side gig.
Take advantage of your skills, or turn a hobby into profit. Doing so can help you generate extra income – which you can put toward reaching your financial goals. Etsy, for example, is a great place to sell one-of-a-kind products. If you have Web design, copy editing or other creative skills, consider offering your services on freelance websites such as Fiverr or Elance. These types of side gigs will allow you to earn extra income while also growing your skills.
Track your progress.
You can’t save money if you don't know where your money is going. Every month, track your net worth using a personal finance tool or app that will show you exactly where your money is going. This will make you think about your entire financial picture from income and expenses to investments and taxes. With this focus, you can ultimately make the greatest impact on your finances in 2015.