Being single and trying to pay off your student loans is tough. While it may be easier to stick to a budget without sharing a bank account with someone else, having another income to help carry the debt burden can be very helpful.
If you don’t have a significant other or family member to help pay your student loans, here’s how to craft a repayment strategy around one income.
The issue with debt and one income
Your financial goals may not be extravagant, but having student loan debt while on a single income means you may not be able to afford the car or home you want. You might even be stuck with an extremely tight budget, one without much wriggle room for incidents or emergencies.
In other words, paying back student loan debt while on a single income can be harder than having debt with a dual income. You want to pay back debt quickly so you can move on to your other financial goals, and with the right planning in place, you can.
Be inspired by debt stories
As you start paying off your student loans, you may feel discouraged that your grand plans for financial freedom seem unattainable. But don’t let this doubt stop you — many other single individuals have been where you are and often felt the same way in the beginning.
Get motivated to start paying off debt by reading other personal debt and money stories. For example, Kara Perez paid off $25,000 of student loan debt without having a full-time job, and Monica Louie and her family paid off $120,000 of multiple types of debt on one income. It can be done, and these people have proven it!
There are countless stories of individuals who started with a variety of debt in different amounts and were able to come out on top. Use their stories to glean advice, wisdom, and tips as a way to propel you forward as you begin to pay down student loans.
Choose a debt payoff method
There are two main strategies for paying off your debts: the avalanche and the snowball method. Both of them have pros and cons, so let’s break down the basics of each so you can choose the best one for your situation.
Debt avalanche method
The debt avalanche method focuses on targeting debts with the highest interest first and paying them down as quickly as possible. You’ll start by listing out all of your debt accounts, including the balance due and interest rates, and then organize them based on the highest interest rate to the lowest interest rate.
The main advantages of this method are that you can save money in interest payments over the long term and essentially be able to pay off your student loans fasters. The downside is that you may be starting off with your largest debt balance first and thus won’t have a “quick win” of paying off a small loan first.
It can often feel like it takes longer to pay down debts using this method, even though the opposite is true.
Debt snowball method
The debt snowball method has the same basic function as the avalanche strategy but it approaches it in the opposite way. Instead of listing your debts with the highest interest rate first, you’ll list out your debts starting with the lowest amount owed.
The main advantage to this method is that since you start off with the lowest balance, you’re able to secure a quick win and feel like you’re actually making progress. This can give you the motivation you need to keep going and tackle larger accounts later.
As you pay off smaller balances, you’re able to allocate those funds towards your next debt and so on, thus creating a “snowball” effect. The downside to this is that you’ll pay more towards interest payments while you’re focusing on the balance owed, which means you’ll be in debt for a longer period of time.
Try alternative debt-reducing strategies
While you’re listing out all your debts and have your accounts in front of you, write down the phone number or website for each. Set aside time to call or email the customer service department for each account and see what your options are. Can you negotiate a lower interest rate?
Depending on your type of student loans, you may be able to refinance them with your current lender or a new lender with better rates or payment options. A quick phone call could help you reduce your monthly payments and give you some much-needed breathing room.
Learn to live a minimal lifestyle
In the past I wouldn’t have given much thought to how adopting a minimal lifestyle and living on less could have such a drastic affect on my ability pay off debt. But honestly, it’s been one of the most impactful changes I’ve implemented while trying to reach financial freedom.
As I paid off $14,000 on a single income, I sold 30 percent of my belongings and moved into an apartment that was 300 square feet smaller. This reduced my monthly rent and stress level, as I was able to afford to travel more and spend money on experiences, instead of collecting things.
In the beginning, it’s tough to embrace a minimalist lifestyle but a simple way to start is by going on a spending challenge. There are multiple types of spending challenges, from cash-only methods to spending diets and year-long shopping bans.
Start small and experiment with doing a spending challenge for just 14 days, then try it for an entire month. Keep increasing your spending challenges until your mindset about consuming and buying begins to change.
You’ll begin to see that you don’t “need” everything you thought you did, and you’ll find that living with less is very liberating. Learn more about how minimalism could help you pay down debt here.
Paying off debt on a single income may seem impossible, but it’s not. Start small in the beginning so you’re not overwhelmed or tempted to give up. Think of your debt payoff journey as a long-term plan, one that’s just the first step towards achieving future goals of financial freedom.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Variable APR||Eligible Degrees|
|Check out the testimonials and our in-depth reviews!
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 3.89% APR (with Auto Pay) to 5.87% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 5.87% 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 Month/Day/Year, 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 08/21/18. 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@example.com, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 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
Savings example: average savings calculated based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were disclosed. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
Application detail: 5 minutes indicates typical time it takes to complete application with applicant information readily available. It does not include time taken to provide underwriting decision or funding of the loan.
Instant rates mean a delivery of personalized rates for those individuals who provide sufficient information to return a rate. For instant rates a soft credit pull will be conducted, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.
Total savings calculated by aggregating individual average savings across total borrower population from 9/2013 to 12/2017. Individual average savings calculation based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were provided. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate||Visit SoFi|
|2.47% – 5.87%1||Undergrad & Graduate||Visit Earnest|
|2.47% – 8.03%4||Undergrad & Graduate||Visit Lendkey|
|2.95% – 6.37%2||Undergrad & Graduate||Visit Laurel Road|
|2.48% – 6.25%5||Undergrad & Graduate||Visit CommonBond|
|2.72% – 8.32%6||Undergrad & Graduate||Visit Citizens|