“There isn’t enough money to pay bills, save, pay off debt, and have fun.”
That’s what Candice Marie, founder of money blog Young Yet Wise, said about the challenges of making ends meet in an expensive city (in her case, the Boston area).
If you, like Marie, are living and working in a city with a high cost of living while trying to get out of debt, her statement is practically the song of your people.
13 ways you can pay off student loan debt in a high-cost city
Finding ways to pay off student loan debt can be tricky when you’re barely keeping up with the high prices of the city where you live.
“There’s only so much you can cut from your budget each month,” Marie said. And when living expenses are high, you’ll reach that hard basement limit on your budget pretty quickly.
But many people who live in a high-cost city manage to pay extra on their debt on top of covering steep expenses. We talked to seven real people doing exactly that and found out how they’re knocking out their student loans. Here are their best tips.
1. Pay high-interest debt first
By paying extra on your debt, you can get ahead of interest charges and save money.
“Pay off high-interest-rate loans first,” said health and fitness writer Karen Morse, and you’ll save the most.
Morse moved to expensive Palo Alto, California, after earning her master’s degree in public health.
“You probably have multiple loans coming out of college or graduate school that are taken out each semester,” Morse pointed out. “If you have a little extra cash to spare each month, consider paying more on that loan (apply it to the principal amount).”
2. Take advantage of income-driven repayment
If your student loan balance or expenses are high compared to your income, standard student loan payments can stretch your budget too thin. That was the case for Samantha Mallon, a mechanical engineer who lives in a high-cost suburb of Denver.
“Living in an area that is a much higher cost than what I was used to growing up has really affected me,” Mallon said. “For my federal loans, I had to switch them into the repayment plan based off my salary.”
Getting on an income-driven repayment plan lowered Mallon’s monthly payments and kept them affordable.
3. Round up student loan payments
“I was always taught by my father, a financial advisor, to round up my required monthly payments to contribute more toward principal,” said Allyson Pereira, an attorney living in a suburb of Providence, Rhode Island.
For example, if you have monthly student loan payments of $360, pay $400 instead. It might not seem like much, but it adds up. You can use our student loan prepayment calculator to estimate your savings.
Pereira sometimes would go the extra mile too.
“If possible, I would add another $100 or so to chip away at the principal even further,” Pereira added.
4. Pay off debt in chunks
Paying extra on student debt each month is a smart strategy. But taking big chunks out of a balance (sometimes called “debt-chunking”) can be even more satisfying.
“Look at the payoff amount of each loan,” Morse said. “If you have a loan that can be paid off in a lump sum, consider doing that when your yearly bonus check arrives instead of splurging on a vacation or luxury item. You will thank yourself in a few years!”
5. Maintain an emergency fund
“Having a large savings is more important than chipping away at debt,” said Rich Fetterly, a lab tech who’s worked to repay $20,000 of his $80,000 student debt.
Building up an emergency fund is a must-do if you live in an expensive city. “Not having a savings leaves you very vulnerable in emergency situations, such as medical accidents or loss of employment,” Fetterly explained.
To make sure he always had a savings safety net, Fetterly used the debt-chunking method.
“[I] saved up in the bank until I reached an amount that could pay off my smallest loan,” Fetterly said, while maintaining a comfortable emergency fund.
6. Create a social debt challenge
As she worked toward paying off debt, Marie found her motivation lagging.
“After a while, paying off debt alone was boring,” Marie said. “So I created a debt challenge and got other people involved.”
Marie enlisted 10 friends and set up a “debt competition to see who could pay off the most debt in 11 weeks.” Together, they paid off $39,500 over the course of the challenge.
“Creating my debt challenge really helped me stay motivated and focused,” Marie added. “I would see other people putting lots of money toward their debt, and so that would motivate me to put more money toward mine.”
7. Set (and follow) a budget
Ryan Alfson, who lives in Denver, is a CPA and co-founder of personal finance blog Just Another Dollar. While living there, Alfson and his girlfriend have paid off $27,000 of their combined $100,000 in debt.
They started with the basics. “First, we established a good written budget,” Alfson said. “In a high-cost city like Denver, there’s infinite ways to spend money if you don’t have a plan.” Simply setting and following a budget helped the couple cut food costs from $1,200 a month to just $650.
8. Cut back on nonessentials (within reason)
Setting up a budget can help you become more intentional about spending.
“It’s very easy to get caught up in the hustle and bustle of NYC and spend an incredible amount of money on brunch, dinner, and drinks,” said Kerrie Barry, an attorney who lives in New York City. She tries to avoid that mindset and instead cooks at home and plans fun “nights in.”
Mallon made a similar point. “Cutting back on the nonessential things in my life has really helped me to pay extra on my debts,” she said.
However, Alfson pointed out that it’s important to add some fun into your spending plan as well. “Our budget still allows us to go out to eat one night per week,” he said.
Alfson and his girlfriend also take advantage of the perks of city living. “There’s always plenty of free events going on around a big city, so take advantage of those instead of spending your money,” he added.
9. Increase your income
“Another way we take advantage of living in a big city is providing services that are in demand,” Alfson said. “Find a side hustle you love and use the earnings to pay down your debt.”
Alfson earns a few hundred dollars each month by pet sitting through Rover — and it’s fun. “The dog time alone is worth it!” he said.
“There are many ways to make extra money in your downtime,” Alfson added.
For instance, Fetterly said he often works overtime, which gives his budget a boost. Pereira has searched through her (and her mom’s) belongings to find treasures worth selling on eBay for extra cash.
10. Rent only what you can afford
“In order to live in Philadelphia, I first had to figure out if the job I was taking could support my living expenses and debt,” Fetterly said.
He knew he’d have to contend with higher costs — on top of $1,000 a month in debt payments. So he started with his projected take-home pay, carefully crunched the numbers, and identified his rent budget: $900 or less. And he stuck to it.
“If you have student loan debt, don’t buy or rent a house [or apartment] you can’t afford,” Morse advised. “Live within your means.”
11. Get a roommate
There are definitely trade-offs to having roommates. But the payoffs can be huge too.
Barry said living with two roommates is a huge part of her strategy to repay her $250,000 student debt (so far she’s knocked out $15,000).
“I pay about $1,150 in rent, and that is with two roommates,” Barry said. “If I lived alone, I would pay close to $1,800 per month.” That means she saves $650 or more a month by living in a shared space. It also cuts back on utility costs, Barry added.
12. Move backward
If it’s an option for you, consider “moving backward” like Marie.
“I moved back home to help me save money and put more toward my debt,” Marie explained. “I still pay rent but not as much as I would if I were on my own.”
It can feel like a setback, Marie acknowledged. “After graduating, it can be tempting to want to live above your means, get your own place, buy new furniture because, hey, you deserve it,” Marie said.
However, according to Marie, if “you have a chance to go back home, you’ll end up moving forward faster,” as you’ll free up more money to pay off debt.
13. Compare buying vs. renting
Depending on the housing market where you live, buying could be cheaper than renting.
“When a couple of friends of mine bought a house and I heard what they were paying for their mortgage, I was shocked,” said Pereira. It was significantly less than her monthly rent of $1,380 for a one-bedroom apartment.
So Pereira decided to save for 14 months, got a down payment together, and bought a home. She now pays a $854 mortgage — saving her $526 a month compared to renting.
Not everyone will save with this strategy, but you could. Of course, it depends on the housing market in your city, so do your research and carefully compare renting versus buying before you decide.
Lastly, although it might not be possible or right for everyone, you might want to consider whether living in an expensive city is worth the cost. Do some cost comparisons and find out if moving to a cheaper city could help you pay off debt more quickly.
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1 Important Disclosures for Earnest.
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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.
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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.
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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.
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