When estimating how much you should put toward your student loan payments, a credit counselor might tell you to aim for 8% of your monthly gross income. But to get close to that number, you might find yourself budgeting until you’ve got the blues, trimming expenses left and right.
So what do you do when you run out of expenses to cut?
That’s the first of five reasons to spend more time increasing your income — and less scraping your budget — when attacking your loan debt or any other financial challenge.
1. Expenses are finite — income is not
We all need to eat meals, live under a roof and have access to transportation. Bare necessities like these cost money. Try as you might, you won’t be able to trim your expenses to $0.
By downsizing your living situation and making smaller cuts, such as to the cable TV cord, you might be able to remove $500, $1,000 or maybe even more from your monthly budget. But there’s a limit to how far frugality can take you.
Your income, on the other hand, has no ceiling. Sure, you might feel unable to earn a six-figure salary if you’re a public school teacher. But you could always change your circumstances through education, hard work and goal-setting. Some options for our hypothetical teacher include:
- Advance your career: Become an administrator, such as a school principal
- Start a side hustle: Teach online, tutor off-campus or write textbooks
- Open a business: Create a teaching academy or tutoring program
If you’re not especially passionate about your job and are aiming for a higher wage, you could also take the more drastic step of transitioning careers.
2. Cutting expenses won’t help you stay out of debt
Forgoing typical expenses can get you out of a jam. Say you need to come up with your minimum student loan payment: Skipping a dinner out with your friends could get you all the way there. That’s the beauty of budgeting. Take from here to help out over there.
But what if you struggle to come up with your monthly payment every month, not just once in a while? Well, then you wouldn’t be alone. Consider that two out of five American adults don’t have the cash to cover a $400 emergency, according to a 2018 report from the Federal Reserve.
Increasing your income can get — and keep — you out of financial jams. With more money coming in every month, you give yourself much more leeway to save up and can account for unforeseeable events like a job loss or medical bills.
3. Income affects your ability to manage your debt
By cutting “fat” in your budget, sure, you can meet or increase your monthly debt payments.
But increasing your income affects your ability to manage your debt, not just repay it.
If you have outstanding student loans and are hoping to refinance them to a lower interest rate, for example, lenders will want to take a peek at your debt-to-income (DTI) ratio. If your DTI’s out of balance, you could fail to qualify for low interest rates or be denied for the new loan altogether.
Some banks, credit unions and online student loan refinancing companies even require applicants to prove a minimum income to qualify. At top-rated lender Splash Financial, for example, you’ll need an income of at least $42,000, whether you have a lean budget or not.
4. Income helps you achieve ambitious financial goals
A budget-only approach ensures you live as affordably as possible. By prioritizing income, however, you can afford the lifestyle you actually desire.
For many people, the three big financial goals are saving for college, buying a home and investing for retirement. Others might have more unique goals, including funding their own business or traveling the world.
No matter your grand aspirations in life, you could view each of them as potential expenses. And it’ll be impossible to tack them onto your budget if your income hasn’t increased.
5. Income development takes more time and effort
By taking a money holiday, you should be able to create a budget and fine-tune it, canceling unnecessary subscriptions and negotiating your routine bills. It could take more than one day to downsize your car or lower your rent, of course, but these are relatively fast paths to saving.
Unfortunately, unless you receive an unannounced financial windfall, you’re not going to be able to increase your income as quickly. Even asking for a raise at work might take a while to hit your paycheck. Similarly, you might have to make a bit of an investment into a new side hustle before you start to see dividends.
Developing and diversifying your income takes months or years — some say it never ends — and there’s no clear-cut way for everyone to reach the heights they desire. If it’s going to be a long slough, even a worthy one, better to start now.
Where your income and budget work hand in hand
Of course, increasing your income won’t do you much good if you don’t already have a budget — or, ahem, spending plan — in place. It can help you keep more of your larger income.
If you were recently promoted at work, for example, budget to utilize your raise wisely.
Still, the argument here is to obsess less over your budget and more about developing multiple streams of income. Unlike the former, the latter comes with a cushion.
Interested in refinancing student loans?Here are the top 7 lenders of 2019!
|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 3.45% APR (with Auto Pay) to 6.99% APR (with Auto Pay). Variable rate loan rates range from 2.05% APR (with Auto Pay) to 6.49% 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 October 11, 2019, 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 10/11/2019. 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 our student 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 SoFi.
3 Important Disclosures for Laurel Road.
Laurel Road Disclosures
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. Mortgage lending is not offered in Puerto Rico. All loans are provided by KeyBank National Association.
ANNUAL PERCENTAGE RATE (“APR”)
Fixed rate options consist of a range from 3.75% per year to 5.80% per year for a 5-year term, 4.25% per year to 6.25% per year for a 7-year term, 4.55% per year to 6.65% per year for a 10-year term, 4.85% per year to 7.05% per year for a 15-year term, or 5.30% 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). The monthly payment for a sample $10,000 loan at a range of 3.75% per year to 5.80% per year for a 5-year term would be from $183.04 to $192.40. The monthly payment for a sample $10,000 loan at a range of 4.25% per year to 6.25% per year for a 7-year term would be from $137.84 to $147.29. The monthly payment for a sample $10,000 loan at a range of 4.55% per year to 6.65% per year for a 10-year term would be from $103.88 to $114.31. The monthly payment for a sample $10,000 loan at a range of 4.85% per year to 7.05% per year for a 15-year term would be from $78.30 to $90.16. The monthly payment for a sample $10,000 loan at a range of 5.30% per year to 7.27% per year for a 20-year term would be from $67.66 to $79.16.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the fixed rate will decrease by 0.25%, and will increase back up to the regular fixed interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
Variable rate options consist of a range from 2.50% 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, 4.25% per year to 6.40% per year for a 10-year term, 4.50% per year to 6.65% per year for a 15-year term, or 4.75% per year to 6.90% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.45% to 4.25% for the 5-year term loan, 1.95% to 4.30% for the 7-year term loan, 2.20% to 4.35% for the 10-year term loan, 2.45% to 4.60% for the 15-year term loan, and 2.70% to 4.85% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 2.50% per year to 6.30% per year for a 5-year term would be from $177.47 to $194.73. The monthly payment for a sample $10,000 loan at a range of 4.00% per year to 6.35% per year for a 7-year term would be from $136.69 to $147.77. The monthly payment for a sample $10,000 loan at a range of 4.25% per year to 6.40% per year for a 10-year term would be from $102.44 to $113.04. The monthly payment for a sample $10,000 loan at a range of 4.50% per year to 6.65% per year for a 15-year term would be from $76.50 to $87.94. The monthly payment for a sample $10,000 loan at a range of 4.75% per year to 6.90% per year for a 20-year term would be from $64.62 to $76.93.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
Borrowers who take out a variable loan with a term of 5, 7, or 10 years will have a maximum interest rate of 9%. Borrowers who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.
There are no origination fees or prepayment penalties associated with the loan. Lender may assess a late fee if any part of a payment is not received within 15 days of the payment due date. Any late fee assessed shall not exceed 5% of the late payment or $28, whichever is less. A borrower may be charged $20 for any payment (including a check or an electronic payment) that is returned unpaid due to non-sufficient funds (NSF) or a closed account.
For bachelor’s degrees and higher, up to 100% of outstanding private and federal student loans (minimum $5,000) are eligible for refinancing. If you are refinancing greater than $300,000 in student loan debt, Lender may refinance the loans into 2 or more new loans.
ELIGIBILITY & ELIGIBLE LOANS
Borrower, and Co-signer if applicable, must be a U.S. Citizen or Permanent Resident with a valid I-551 card (which must show a minimum of 10 years between “Resident Since” date and “Card Expires” date or has no expiration date); state that they are of at least borrowing age in the state of residence at the time of application; and meet Lender underwriting criteria (including, for example, employment, debt-to-income, disposable income, and credit history requirements).
All loans must be in grace or repayment status and cannot be in default. Borrower must have graduated or be enrolled in good standing in the final term preceding graduation from an accredited Title IV U.S. school and must be employed, or have an eligible offer of employment. Parents looking to refinance loans taken out on behalf of a child should refer to https://www.laurelroad.com/refinance-student-loans/refinance-parent-plus-loans/ for applicable terms and conditions.
For Associates Degrees: Only associates degrees earned in one of the following are eligible for refinancing: Cardiovascular Technologist (CVT); Dental Hygiene; Diagnostic Medical Sonography; EMT/Paramedics; Nuclear Technician; Nursing; Occupational Therapy Assistant; Pharmacy Technician; Physical Therapy Assistant; Radiation Therapy; Radiologic/MRI Technologist; Respiratory Therapy; or Surgical Technologist. To refinance an Associates degree, a borrower must also either be currently enrolled and in the final term of an associate degree program at a Title IV eligible school with an offer of employment in the same field in which they will receive an eligible associate degree OR have graduated from a school that is Title IV eligible with an eligible associate and have been employed, for a minimum of 12 months, in the same field of study of the associate degree earned.
The interest rate you are offered will depend on your credit profile, income, and total debt payments as well as your choice of fixed or variable and choice of term. For applicants who are currently medical or dental residents, your rate offer may also vary depending on whether you have secured employment for after residency.
The repayment of any refinanced student loan will commence (1) immediately after disbursement by us, or (2) after any grace or in-school deferment period, existing prior to refinancing and/or consolidation with us, has expired.
POSTPONING OR REDUCING PAYMENTS
After loan disbursement, if a borrower documents a qualifying economic hardship, we may agree in our discretion to allow for full or partial forbearance of payments for one or more 3-month time periods (not to exceed 12 months in the aggregate during the term of your loan), provided that we receive acceptable documentation (including updating documentation) of the nature and expected duration of the borrower’s economic hardship.
We may agree under certain circumstances to allow a borrower to make $100/month payments for a period of time immediately after loan disbursement if the borrower is employed full-time as an intern, resident, or similar postgraduate trainee at the time of loan disbursement. These payments may not be enough to cover all of the interest that accrues on the loan. Unpaid accrued interest will be added to your loan and monthly payments of principal and interest will begin when the post-graduate training program ends.
We may agree under certain circumstances to allow postponement (deferral) of monthly payments of principal and interest for a period of time immediately following loan disbursement (not to exceed 6 months after the borrower’s graduation with an eligible degree), if the borrower is an eligible student in the borrower’s final term at the time of loan disbursement or graduated less than 6 months before loan disbursement, and has accepted an offer of (or has already begun) full-time employment.
If Lender agrees (in its sole discretion) to postpone or reduce any monthly payment(s) for a period of time, interest on the loan will continue to accrue for each day principal is owed. Although the borrower might not be required to make payments during such a period, the borrower may continue to make payments during such a period. Making payments, or paying some of the interest, will reduce the total amount that will be required to be paid over the life of the loan. Interest not paid during any period when Lender has agreed to postpone or reduce any monthly payment will be added to the principal balance through capitalization (compounding) at the end of such a period, one month before the borrower is required to resume making regular monthly payments.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of October 1, 2019 and is subject to change.
4 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers.
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 2.05% effective September 10, 2019.
6 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.
7 Important Disclosures for College Ave.
College Ave Disclosures
College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
1College Ave Refi Education loans are not currently available to residents of Maine.
2All rates shown include autopay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation.
3$5,000 is the minimum requirement to refinance. The maximum loan amount is $300,000 for those with medical, dental, pharmacy or veterinary doctorate degrees, and $150,000 for all other undergraduate or graduate degrees.
4This informational repayment example uses typical loan terms for a refi borrower with a Full Principal & Interest Repayment and a 10-year repayment term, has a $40,000 loan and a 5.5% Annual Percentage Rate (“APR”): 120 monthly payments of $434.11 while in the repayment period, for a total amount of payments of $52,092.61. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
Information advertised valid as of 09/23/2019. Variable interest rates may increase after consummation.
|2.05% – 6.49%1||Undergrad & Graduate|
|2.05% – 5.98%2||Undergrad & Graduate|
|2.25% – 6.65%3||Undergrad & Graduate|
|2.43% – 7.60%4||Undergrad & Graduate|
|2.14% – 7.21%5||Undergrad & Graduate|
|2.01% – 8.88%6||Undergrad & Graduate|
|2.74% – 6.24%7||Undergrad & Graduate|