- Paying off student loans is daunting, but starting with one spending area can make it easier for you.
- People who repaid their loans reduced their food expenses, housing costs and other savings.
- Some married couples lived on one income while using the other’s salary to pay off the debt.
- This article is part of the “Better, Smarter, Faster” series focusing on effective choices you can make with your money to achieve big life goals.
When making resolutions about paying off student debt, it’s easy to set unrealistic goals and focus only on the big picture. But instead of reviewing every dollar you spend, it can be easier to look at the details: Cut spending in one area of your budget at a time, working gradually towards your debt repayment goal.
We asked seven people who paid off their student loans which changes made the biggest difference.
1. Pay attention to food expenses
“At one point, we were spending $1,000 on food,” says credit expert Jasmine McCall, who worked with her husband Jay to pay off $96,452 in student debt over four years, of her monthly expenses. Once they got that reality check, the McCalls focused on cutting groceries and restaurants before tackling other areas where they could cut back.
The McCalls were also living off Jay’s $85,000 salary while allocating all of Jasmine’s $88,000 salary to their student loan debt. Living on one partner’s salary while using the other partner’s salary to pay off debt is a common strategy couples use to speed up the process of paying off debt.
2. Reduce the rent where possible
Imani Porter in Washington, DC, and Danielle Desir in Connecticut both moved in with their families while paying off their student loans. Not everyone has the privilege of relying on their family to save on rent, but Porter and Desir say it’s helped speed up their debt-paydown journey. Porter paid off $25,000 in debt in one year, while Desir paid off $61,823 in four years.
Software engineer Nickolas Natali moved into a van for a year to drastically reduce his living expenses and pay off $59,000 in one year. However, Natali doesn’t recommend van life for everyone. He told Insider, “I was peeing in a bottle and hiding under curtains held up with magnets so no one could see me, and yeah, that wasn’t sexy at all.”
3. Reassess insurance needs
After being fired from her job, debt repayment coach Ja’Net Adams took a hard look at her family’s finances to see where she could save money. Because Adams had worked in the pharmaceutical industry, free health insurance was usually part of benefits. Once she lost her job, she had to look elsewhere for coverage. “Thank goodness that was when Obamacare was happening,” Adams told Insider.
She also called her home and auto insurance providers to see if she qualified for a lower rate or if there was a cheaper package available. “We had too much
and too much home insurance,” says Adams. “We saved $300 to $400 a month just by downsizing.
Once she found a new job, she was able to speed up the process of paying off her debt by maintaining those same insurance budget cuts.
4. Take a look at 401(k) contributions
With a combined income of $125,000 a year, Ashley Patrick and her husband were contributing 11% to their 401(k). A 401(k) plan is an employer-sponsored retirement account that lets you put a portion of your salary, before taxes, into an investment account that earns compound interest.
To prioritize paying off high-interest debt, Patrick and her husband put their 401(k) contributions on hold to focus on paying off $25,000 in student loans in just 10 months.
This does not mean that it is necessarily recommended to stop long-term pension contributions. Since retirement savings are a compound interest investment, saving as early as possible makes a huge difference. If you decide to put your retirement savings on hold to pay off your debts (or perhaps just reduce them temporarily), make sure you don’t forget to take them back in the future.