Competing financial goals can often spread your resources thin and prevent you from making progress on paying back your student loans.
Trying to do too much with too little can leave you feeling overwhelmed, stressed, and crushed by debt. If student loans are a major pain point in your finances, then it’s time to get serious about reworking your repayment plan.
“There are more costs to individuals than just the interest rate on their debts,” says Jeff Nordin, certified financial planner and founder of financial education firm Core Financial Concepts. “If your student loans are causing you stress and grief, then you need to target it.”
3 financial steps you need to prioritize
When setting financial goals, you need to first set up some savings to ensure your stability.
According to Nordin, a strong financial foundation has two key steps and elements: creating an emergency savings fund and having retirement savings that are on-track. These are important financial priorities you should put before student loan repayment.
An important next step is tackling debts. Focus on the debts that carry high-interest rates, like credit card debt, and pay the minimums on the rest.
Once you have these three steps in order, deciding how to rank other financial priorities will come down to your personal values and plans.
5 financial goals that can wait
When you’re serious about paying down student loans, it can help to identify expenses you should put off until your balances are paid down.
Here’s a list of financial goals that can probably be put on hold to focus on student debt.
1. Upsized housing
Getting in a nicer rental or saving up to buy your own home are worthy financial goals.
But if you’re putting more of your cash into your housing, you’ll have less available for paying off student loans. High-balance student loan debt can also make it trickier to qualify for a mortgage or even an apartment.
41 percent of college-educated Americans say they have postponed purchasing a residence because of student debt, according to our 2015 Student Loan Burden Report. So if you’re putting off upgrading your digs to tackle student debt, you’re not alone.
And if your current rental is good enough for right now, you can probably make it work for a few more months, or even another year. Plus, you’ll probably be rewarded with more discretionary funds that can be put toward a student loan balance.
2. 6-month (or more) emergency fund
Most money experts agree building an emergency fund is a vital part of a sound money plan. But they have differing thoughts on just how much is “enough,” with opinions ranging from $1,000 up to eight months’ worth of expenses.
The $1,000 mark is a good starting point, and having up to three months’ worth of essential expenses provides even more security. But an emergency fund equal to six months’ expenses (or higher) may be more than most people need.
Do you have a bit of a cushion in your savings account to cover most of life’s unexpected costs? If the answer is yes, consider diverting some of the money you’ve been putting into savings towards student loan repayment instead.
3. Non-retirement investments
It’s important to save a bit of your paycheck into a 401k, IRA or other retirement accounts. If you’re doing this, you can probably hold off on other investments until you’ve lowered your student debt.
While investing can be a great way to grow your money and build wealth, there’s not always a guaranteed return. But paying off debt and avoiding interest is a surefire way to lessen costs and keep more of your money.
“Paying down a balance with an interest rate of 10 percent is the exact same as earning a return of 10 percent on an investment,” Nordin points out.
4. Charitable giving
The impulse to do good with your money is a noble one. However, when you’re struggling with debt, it may not be the best time to give your cash away.
If you have an altruistic impulse, consider giving in other ways. Volunteering or donating gently-used items can be great alternatives to cash gifts (and often come with tax write-offs, too).
The sooner your student loans are gone, the sooner you’ll be free of monthly payments. Once you’re done writing checks to your lender every month, you can give to the charity of your choice without compromising your finances.
5. Bucket list items
A big motivation to get better with your money is so you can afford to achieve your dreams. Whether you want to travel internationally, start a small business, or even own a luxury car — you’ll need money to do it.
But pulling the trigger on these too soon can take money away from paying off student loans. Even worse, chasing your dreams too soon could land you in even more debt.
Finding the right balance
The key here is finding balance or ways to create enjoyment and fulfillment with your current budget so you can stay on-track for big-picture, long-term goals like paying off student debt.
“Life happens, and you’d better stop and have fun along the way — with the perspective that you are planning for your future alongside that,” explains Nordin.
It takes some creative thinking, but there are plenty of ways to maximize enjoyment on a minimal budget. If you love to travel, try and take local trips to satisfy your wanderlust.
For those dreaming of entrepreneurship, a low-investment side hustle can be a cheap way to ramp-up. And if you have expensive tastes in cars — well, you can always test-drive a hot model at the dealership.
Whatever your financial goals are now and in the long-term, being proactive and intentional with your money will help you make the most of it.
“If you’re not being proactive, managing your numbers — nobody else is going to be doing that for you,” Nordin says. “It’s important for people to think of themselves as their own chief financial officer.”
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 6.97% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.23% 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% – 6.23%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|