4 Essential Steps for Repaying Your Student Loans on a Variable Income


After the recent recession, many people had to find ways to earn an income without a traditional 9-5 job. The result of that dark era in economic history was actually quite influential for freelancers everywhere.

Since then, freelancers in every industry have flourished. The number of freelancers in America now totaling over 53 million people, and that number is only rising. In fact, a recent trends report by Intuit estimates that by 2020, over 40% of the United States workforce will be made up of freelancers.

As someone who has been a self-employed freelancer for over 18 months now, I know firsthand how rewarding it is to be in charge of my own career destiny. However, I also know how difficult it is to stay motivated and ensure that all the bills get paid on a variable income.

One type of debt that is difficult to conquer as a freelancer and business owner is student loan debt. After all, one month of income could be the highest in your work history while the next month could be the lowest.

So, how can you pay off your student loans and make sure you have enough money to live on and pay your other bills? Here are a few tips:

1. Be Aware of Your Regular Monthly Expenses

If you have variable income, it’s important to be very aware of your expenses. It’s great if your monthly income is on average $6,000, but if you have to pay $3,000 just in business expenses every month, you have to budget accordingly.

People who have variable income also need to consider other responsibilities. These include large bills that come in only at certain times a year, like car insurance, tax payments, and healthcare premiums. Because you don’t know exactly how much money you will earn each month, these loan payments can make or break you.

Being closely aware of your regular spending, in addition to knowing your larger yearly expenses, is important. People who have variable income need to be more conscious of their spending since they never know if’ they’re going to have an income dip the following month.

2. Know Your Averages

Knowing your average monthly income is a great tool in helping you decide how high of a student loan payment you can make. It can be scary to send in $500 extra to your student loan servicer, especially if you don’t know what the next month will bring.

However, if you have a sense of your monthly averages and nothing has changed in your business, you can feel confident knowing that you can afford a certain payment. This will take time to figure out. If you are new to variable income, you should wait until you can average a few months of income.

If you’ve had variable income for years, you can average 12 months to get a sense of what to expect. This is my own trick for budgeting with my variable income. If I work hard, my monthly income will likely increase over time, allowing me to make higher and higher student loan payments until I get rid of my debt entirely.

3. Make Your Student Loan Bill A Top Priority

I have several freelancers whom I hire for my own business. These contractors include staff writers, technical help, and a virtual assistant who works up to ten hours every week helping me. I know I have to pay my team in order for my business to run effectively, so I always make sure I have a certain amount of money in my bank account to pay them every month.

I’m sure other freelancers have people they can’t live without, too, like a regular babysitter who helps them get work done without kids climbing all over them.

If you always make sure your bills are covered in these areas, then why should your student loan payment be any less important? After all, decreasing your student loan burden only increases your total net worth. Once your student loan is paid off, you’ll have more money each month to devote to improving your business or even your retirement account.

Because of these considerations, you should treat your student loan-payment as one of the most important bills you have, along the ranks of your rent and electric bill. If you are short on cash, you can get rid of your cable, co-working space, extra office supplies, and even some of your subcontractors before skipping a student loan bill.

By treating your student loan bill as a top priority and a “need” rather than just another monthly bill, you will be more focused on it. And you’ll be well on your way to being student loan debt free.

4. Have an Emergency Fund

I make it a point to keep an emergency fund at all times. This fund, above everything else, makes me sure that I always have a backup to pay my student loans.

An example that may help you is that if you’ve calculated that you can afford a $400/month student loan payment based on your expenses and averages, you should continue to pay that each month, always keeping it a top priority with your other vital monthly expenses like rent or your mortgage payment.

However, if you have a bad month in which a key client doesn’t pay or a large contract doesn’t come through, you might be concerned about making that $400 payment in addition to all your other financial responsibilities. This is where having an emergency fund will help you to keep your monthly budget on track. You can borrow from yourself, and as soon as you have a high income month again, you can refill your emergency fund.

Most financial experts recommend starting an emergency fund at $1,000-$2,000, which will cover most basic life emergencies. Then, once you have that in place, you can slowly grow it to cover six months of expenses. For people with variable income, a large emergency fund is even more important because they can’t always predict how much they will make from month to month.

My current emergency fund sits at $5,000, and while I’m always adding to it when I can, I feel comfortable knowing that it would cover most major issues.

Using these tips, you should not only become more aware of your monthly spending and business expenses, but you should also have a better handle on just how much you can afford in student loan payments. This estimate might allow you to pay well above the minimum to pay off your student loans faster, or it will let you know where you need to cut back so you can make your payments on time.

Over time, you will get more and more used to your variable income and how to predict its highs and lows. I know it’s been a big learning experience for me, but being a part of the freelancer economy and having more autonomy in my life has been more than worth it.

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