Making extra — or extra large — monthly payments is key to repaying your student loans ahead of schedule. But coming up with that extra cash is a challenge. Thankfully, you can carve out more room in your budget by learning how to avoid wasting money.
Budgeting is a powerful financial tool, yet it begs the question: How much help would it really be in paying off your loan?
How to avoid wasting money and repay student loans: our sample scenario
As a thought experiment, we ran the numbers on some potential savings in five different categories to see what that extra money would mean for a typical $30,000 student-loan debt tagged at 7.00% interest.
Note that the sample savings below are only anecdotal, based on examples from our Student Loan Hero blog — they might give you a rough idea, but your own savings could be greater or smaller, depending on the situation.
1. Prepared meals
You might think there’s not enough time in the day to work your day job, worry about your loans and still prepare a brown bag for lunch and a hot meal for dinner.
But every trip to (or order from) the deli, cafe or restaurant starts adding up. Delivery costs nearly five times the price of cooking at home, and even meal-kit companies are about three times more expensive than doing your own grocery shopping and preparation, according to the home-cooking website Wellio.
Instead of eating into your budget, you might try meal planning on the weekend to fill your fridge for the rest of the week.
- Sample savings: 2,900 per year by cooking on a budget
- Loan payoff: Adding $2,900 — or $242 per month — in extra payments could save you $6,125 in interest
Whether your guilty pleasure is pressing “request pickup” for Uber or Lyft ride-shares — or jumping in your car when you could take your bicycle instead — a lot of money can be saved on your commute to and from work. Carpooling and becoming a one-auto family, for example, could save you about $8,849 — the cost to operate and own a vehicle, according to AAA.
Even if you work remotely, consider your methods of transportation and how much you could save using cheaper alternatives, such as the bus or train.
Or, if you’re not ready to make a major change to your daily routine, consider that you could save three figures the next time you take a one-off trip for fun. By using strategies, such as booking your flight at the right time and not checking bags, you could save north of $600.
- Sample savings: $619 on your next vacation
- Loan payoff: Making a lump-sum payment of $619 could shave three months off your loan term
With so much money going to your lender every month, you might be tempted to treat yourself occasionally. Whether you prefer online shopping or heading to the mall, however, there are ways to cut down on wasteful spending.
You might try putting every purchase through our five-question “stress test,” for example. Or you could take a break altogether from consumerism and try a shopping ban:
- Sample savings: $600 per month with a shopping ban
- Loan payoff: Submitting $600 in extra payments per month — or $7,200 for the year — could take seven years off your loan term and save you $8,554 in interest
Be watchful for wasteful spending that is more passive in nature. Think about all the recurring charges that appear on your credit card statement, for example.
Maybe you have a gym membership you’re not using or a cable subscription you could replace with a cheaper alternative. Whatever the case, taking a line-by-line approach to your budget could save more than you might think. Start with the entertainment category, for example, where cord-cutting could save you a Benjamin each month:
- Sample savings: About $103 per month by canceling cable
- Loan payoff: Throwing another $103 per month — or $1,236 for the year — could get you out debt almost three years faster and without forking over $3,738 of interest
You might be wondering how the roof over your head could be called waste. The differences between living below, at or beyond your means, however, could dramatically affect your loan repayment schedule.
If you’re past the point of moving back home to live rent-free with Mom and Dad, consider the options at your disposal. To start, ask yourself whether you’re spending the right amount for rent.
Short of picking up and moving to a cheaper place, you might give your landlord a call:
- Sample savings: $1,800 per year by negotiating rent
- Loan payoff: Redirecting your savings — it comes out to $150 per month — to your lender would save you $4,746 in interest
Learn how to avoid wasting money by calculating your repayment savings
Even if you’re skeptical about how much waste you could find in your budget, you might be intrigued by how the potential savings can be parlayed into a shorter student loan repayment.
Of course, the figures above don’t apply to your specific situation. To see how much you could benefit from identifying and cutting waste, input your loan amount and interest rate into these easy-to-use calculators:
- Student loan prepayment: Set a new finish line after accounting for set extra payments each month.
- Lump-sum extra payment: Figure the effect of a one-time (but extra-big) payment.
Once you’ve trimmed the waste — and, hopefully, reaped the rewards — you can focus on being wiser with your spending. That should lead to an even cheaper and shorter student loan repayment.
Interested in refinancing student loans?Here are the top 6 lenders of 2020!
|Lender||Variable APR||Eligible Degrees|
|1.99% – 5.64%1||Undergrad & Graduate|
|1.89% – 5.90%2||Undergrad & Graduate|
|2.25% – 6.09%3||Undergrad & Graduate|
|1.89% – 6.77%4||Undergrad & Graduate|
|2.39% – 6.01%||Undergrad |
|1.99% – 5.41%5||Undergrad & Graduate|
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 2.98% APR (with Auto Pay) to 5.79% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 5.64% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of July 31, 2020, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 7/31/2020. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.
© 2020 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.
Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.
Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.
Interest Rate: A simple annual rate that is applied to an unpaid balance.
Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of September 9, 2020. Information and rates are subject to change without notice.
3 Important Disclosures for SoFi.
4 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount.
The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice.
To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of September 10, 2020.
5 Important Disclosures for CommonBond.
Offered terms are subject to change and state law restriction. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900), NMLS Consumer Access. If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.16% effective August 10, 2020.