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% – 6.65%1||Undergrad & Graduate|
|1.99% – 7.10%2||Undergrad & Graduate|
|2.99% – 6.44%3||Undergrad & Graduate|
|2.39% – 6.01%||Undergrad |
|1.99% – 6.43%4||Undergrad & Graduate|
|3.18% – 6.07%5||Undergrad & Graduate|
|Check out the testimonials and our in-depth reviews!
1 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 June 23, 2020. Information and rates are subject to change without notice.
2 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Splash Financial loans are available through arrangements with lending partners. Your loan application will be submitted to the lending partner and be evaluated at their sole discretion. For loans where a credit union is the lender, or a purchaser of the loan, in order to refinance your loans, you will need to become a credit union member.
The Splash Student Loan Refinance Program is not offered or endorsed by any college or university. Neither Splash Financial nor the lending partner are affiliated with or endorse any college or university listed on this website.
You should review the benefits of your federal student loan; it may offer specific benefits that a private refinance/consolidation loan may not offer. If you work in the public sector, are in the military or taking advantage of a federal department of relief program, such as income based repayment or public service forgiveness, you may not want to refinance, as these benefits do not transfer to private refinance/consolidation loans.
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 May 1, 2020.
Fixed APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rate options range from 2.88% (without autopay) to 7.27% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Rates are subject to change without notice. Fixed rate options without an autopay discount consist of a range from 2.88% per year to 6.21% per year for a 5-year term, 3.40% per year to 6.25% per year for a 7-year term, 3.45% to 5.08% for a 8-year term, 3.89% per year to 6.65% per year for a 10-year term, 4.18% per year to 5.11% per year for a 12-year term, 4.20% per year to 7.05% per year for a 15-year term, or 4.51% per year to 7.27% per year for a 20-year term, with no origination fees. The fixed interest rate will apply until the loan is paid in full (whether before or after default, and whether before or after the scheduled maturity date of the loan).
Variable APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Variable rate options range from 1.99% (with autopay) to 7.10% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Our lowest rate option is shown with a 0.25% autopay discount. Our highest rate option does not include an autopay discount. The variable rates are based on the Variable rate index, is based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of April 27, 2020, the one-month LIBOR rate is 0.43763%. The interest rate on a variable rate loan is comprised of an index and margin added together. The margin is a fixed amount (disclosed at the time of your loan application) added each month to the index to determine the next month’s variable rate. Variable rate options without an autopay discount consist of a range from 2.01% per year to 6.30% per year for a 5-year term, 4.00% per year to 6.35% per year for a 7-year term, 2.09% per year to 3.92% per year for a 8-year term, 4.25% per year to 6.40% per year for a 10-year term, 2.67% per year to 4.56% per year for a 12-year term, 3.44% per year to 6.65% per year for a 15-year term, 4.75% per year to 6.93% per year for a 20-year term, or 5.14% per year to 7.10% for a 25-year term, with no origination fees. APR is subject to increase after consummation. Variable interest rates will fluctuate over the term of the borrower’s loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a co-signer. The maximum variable rate may be between 9.00% and 16.00%, depending on loan term. The floor rate may be between 0.54% and 4.21%, depending on loan term. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
3 Important Disclosures for SoFi.
4 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 3.19% APR (with Auto Pay) to 6.43% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 6.43% 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 June 15, 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 6/15/2020. 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.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). 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 0.19% effective June 10, 2020.