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5 Steps To Attack Your Student Loans

By Frugaling 24 Comments

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Here are 5 quick and painless ways to cut your expenses and attack your student loans. These methods have personally helped me to attack my student loan debt and greatly reduce my lifetime interest.

This is a guest post from Syed from The Broke Professional! He runs an up and coming personal finance site for working professionals. Thanks for the article, Syed!

I’m an optometrist. Like many jobs in medicine, it has a strong starting income and potential, especially if you become a successful business owner. As much as I love my job, there is one thing I hated about the process of becoming an eye doctor: student loan debt.

We graduated with a lot of it – about $150,000 in total. Worse? I have colleagues who were in over $200,000 in debt. The story is similar for graduates of medical, dental, pharmacy, and law schools. According to a report by the American Association of Medical Colleges, the median level of debt for graduates in 2013 was $175,000!

The main problem is of course continuously rising tuition prices that probably won’t be decreasing any time soon. There’s just too much money to be made for higher education and the big banks. Just to get a glimpse on the current status of medical school tuition, here is a US News report on the 10 most expensive medical schools. Students can routinely graduate with well over $200,000 in debt!

Rising tuition rates are a highly charged political issue which probably won’t be resolved anytime soon. But there is something we can control, and that is how we decide to attack our student loans. Most lenders put you in 25-year-payoff plans, which is a ludicrously long time that leads to hundreds of thousands of dollars in interest.

Here are 5 quick and painless ways to cut your expenses and attack your student loans. These methods have personally helped me to attack my student loan debt and greatly reduce my lifetime interest:

1. Ditch The Gym Membership

Like most people, I thought getting a gym membership was the responsible and healthy thing to do. With rows and rows of treadmills and dumbbells, getting in shape was an inevitability. After a while, I was no longer enjoying the workouts, and made up any and all excuses not to go to the gym. There was the whole process of getting ready, driving to the gym, finding a parking spot, and searching for the least sweaty machine to use. This was going on for a few months until I decided to sit down and evaluate my gym membership. I realized the workout I enjoyed doing at the gym the most was playing basketball. I cancelled the membership and focused on playing outdoor basketball and running outside, two almost-free activities that I actually have fun doing.

Savings: $80/month

2. Look At Your Wireless Plan

I’ve been with Verizon Wireless for a while now and I’m happy with their service. Calls are rarely dropped and their customer service is pretty good. When they changed to their limited data program, I was defaulted into the 4 GB data tier, mainly because it didn’t really change my wireless bill.  After a few months I decided to check how much data we were using, and it was well under half a GB! I get a WiFi connection both at home and work, so I’m not really using cellular data much. I switched us into the lowest, 1GB-tier plan and haven’t felt a data pinch since. It can pay to check the current status of your wireless plan, and make adjustments accordingly.

Savings: $30/month

3. Run That Car Into The Ground

For most Americans, getting a new car every 3-5 years is normal. It’s almost a rite of passage. Ironically, it’s also one of the worst financial decisions you can make. A car is not an investment, yet people are content with paying tens of thousands of dollars and/or getting a high interest loan that will guarantee a negative return. There are alternatives to driving, such as public transportation, carpools, and biking to work.

Savings: At least $200/month

4.  Shop Around For Auto Insurance

The only thing good about auto insurance companies is their commercials. Most of the auto insurance companies are pretty much the same when it comes to customer service. If you look at reviews online, pretty much all the companies have as many decent reviews as bad ones. Reviews may vary, but generally, customer service is pretty much the same across the board. This means that price is the overriding factor in choosing auto insurance, and in my experience it really is worth it to shop around.

I was with Nationwide for around 4 years. I originally signed up with them because a family friend worked for them. I accepted their rate (a little over $200/month) and was relatively happy with their service (except for the fact they charged a fee to pay by credit card). In any case, I didn’t think much about switching until a few months ago, when I decided to get a quote from GEICO. It was $120 less per month than my current rate. That’s over 50%! It seemed too good to be true, so I got quotes from other companies and was consistently getting much lower rates than my current. I needed to switch and after all the numbers were crunched, I ended up saving a little over $100/month.

Savings:  $100/month

5.  Get A Credit Card That Pays

Optimizing credit card use is a mini-obsession of mine. I enjoy finding ways of getting credit card rewards on stuff I already spend my money on. The most rudimentary rewards cards give 1% cash back, which is $10 back on $1000 worth of purchases.  The key is finding cards with higher rates for certain categories like groceries or gas stations and cards with sign up bonuses for certain levels of spending. The Barclaycard Arrival World Mastercard offers 2% cash back on all purchases and a $400 bonus. This can easily get you a few $100 a month here and there. Plus, it’s nice to get something from the big banks.  You do need to be careful not to increase your spending just to get some rewards, as this would wipe out any benefit from the card.

Savings: $10-$100/month

These 5 easy savings tips produced over $400 in monthly savings. Applying that directly to your highest interest rate student loans can make a world of difference. For example, a student loan balance of $30,000 with a 6% interest rate and $200 monthly payment would take 23 years to pay off with just the minimum payment. Applying that $400 on top of the minimum payment, the loan would now take just 5 years to pay off! Truly astounding numbers and proof that making extra payments can drastically reduce the length of the loan and interest paid.

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Filed Under: Loans, Save Money Tagged With: Student Loans

Comments

  1. John P says

    November 1, 2013 at 3:22 pm

    Those are some nice savings. I would probably use some of the money to invest but paying off a loan is not a bad idea at all.

    Reply
    • Sam Lustgarten says

      November 1, 2013 at 3:49 pm

      Hey John,

      That’s a great idea, but with student loans, it can be dangerous to invest instead of paying them off. Student loans like mine are accumulating about 6.8% interest, so I need to pay them off ASAP before considering adding risk in the form of investments.

      Thanks for your comment!
      Sam

      Reply
  2. Amy Pond says

    November 1, 2013 at 3:54 pm

    Great article! There were some genuinely smart ideas on saving money.

    Reply
    • Syed says

      November 1, 2013 at 6:52 pm

      Thanks Amy! This is just a few of the things I thought of if you have any money savers of your own please feel free to share!

      Reply
  3. Kumail says

    November 1, 2013 at 4:11 pm

    Awesome article!

    These are all great ideas. We often forget these big ticket items that we pay for on a monthly basis and how re-evaluating them from time to time can really save in the long run.

    Reply
    • Syed says

      November 1, 2013 at 6:48 pm

      Thanks. Yeah it definitely pays to see exactly where your money is going and how we can use it better.

      Reply
  4. Nicole says

    November 1, 2013 at 4:23 pm

    Very helpful! This is a great reminder to re-evaluate your monthly spendings. It’s so easy to get complacent in the way we spend when there so many easy, simple ways to save a couple dollars that will make a big difference in the long run when put towards paying off those seemingly unremitting school loans.

    Reply
    • Syed says

      November 1, 2013 at 6:50 pm

      Glad you found it helpful Nicole. You definitely need all hands on deck when it comes to paying off those student loans.

      Reply
  5. Peter H. says

    November 1, 2013 at 5:56 pm

    Yes, awesome personal finance 101. If you’re in debt, you got to hustle your way out.

    Reply
    • Syed says

      November 1, 2013 at 6:57 pm

      Yup that’s what personal finance boils down to.

      Reply
  6. Sarah Raza says

    November 1, 2013 at 7:22 pm

    Very helpful article! I hope to see a entry on your blog focusing on getting a Credit Card that Pays. We have one, but I’m always wondering if we can do better. I personally couldn’t give up my gym, but can you suggest other monthly services that are not meeting their full potential?

    Reply
    • Syed says

      November 2, 2013 at 9:46 am

      Thanks Sarah. There are so many good credit cards out there I will definitely have some posts about those upcoming. Sam has some good posts on this site. Subscribe to my email feed and stay tuned!

      Reply
  7. Shaj says

    November 1, 2013 at 7:59 pm

    Great article! I would also probably suggest selling old collectibles that you may not use anymore. May not be a huge savings in the long run like your suggestions, but everything helps!

    Reply
    • Syed says

      November 2, 2013 at 1:25 pm

      Thanks. Yeah everything really does help especially when paying off student loans.

      Reply
  8. Sophie says

    November 1, 2013 at 8:33 pm

    We often overlook trying to save on smaller expenditures like cell phones and cable but if you cut back on enough you can have a decent amount of savings at the end of the month, freeing that money up for paying off debt. Good reminder!

    Reply
    • Syed says

      November 2, 2013 at 1:26 pm

      Yeah a lot of times we pay these bills without thinking about them. It really pays to revisit them every so often and see how we can save more. Thanks for the comment.

      Reply
  9. Jen @ Frugal Rules says

    November 3, 2013 at 1:56 am

    Too bad that some college graduates, even before they can start on a career path, debt is already hounding them. But then again, it is great that you can share saving tips like these. With enough discipline and frugality, one just might make it and be debt-free eventually.

    Reply
    • Sam Lustgarten says

      November 3, 2013 at 1:23 am

      Jen,

      Thanks for your encouraging comment! That’s definitely what I’m trying to do!

      These are some fantastic tips by Syed, aren’t they? 😉

      All the best,
      Sam

      Reply
  10. Maribel says

    November 4, 2013 at 9:32 am

    These are all great ideas! I am one of these people that graduated professional school with over $200,000 in student loan debt :-/

    I will definitely start trying to lower my cell phone and car insurance payments. I think it’s easy to get into a one of these plans and not search for better prices. I think for me it was more of a convenience to just stick with what I had.

    Thanks!

    Reply
    • Syed says

      November 4, 2013 at 2:49 pm

      Thanks Maribel. Yeah sometimes it is easy to get used to our normal monthly payments. But it can help to check every once in a while to see if you can get a better deal.

      Reply
  11. Rose says

    November 6, 2013 at 10:49 am

    As a student who is currently in graduate school with loans from undergrad, these are really helpful tips, thanks!

    Reply
    • Syed says

      November 8, 2013 at 9:07 am

      Thanks for the comment Rose! Good for you most grad students are kind of oblivious to the effect of student loans until they enter the real world, which can be a costly mistake.

      Reply
  12. Michael says

    November 7, 2013 at 11:14 am

    Very good information! You are correct by saying we often will overpay for services we don’t need or won’t even use. I have recently, well in the last few months, have canceled one cell phone provider for another with almost the exact same features from a plan listed at $99 month (more like $120 after local, state, etc. etc. taxes) to another for $60 a month! I definitely will stay abreast with your blog.

    Reply
    • Syed says

      November 8, 2013 at 9:07 am

      Thanks Michael. Glad you enjoyed the post stay tuned for more!

      Reply

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