How to Pay Off Student Loans When You Are Broke

Last updated on August 18th, 2024 at 06:00 am

Many students and new graduates face the challenge of paying off their student loan debt. This can be a stressful and overwhelming situation, especially when you have no money, no job, and no prospects. You might feel like you are trapped in a financial hole that you can never escape from. But don’t lose hope. There are ways to pay off your student loans even when you are broke.

You don’t have to let your debt control your life. You can still achieve your goal of becoming debt-free and financially independent by following a realistic and effective plan. In this post, we will show you how to create such a plan by following five steps. These steps are: know your loans, cut your expenses, increase your income, apply for grants and scholarships, and make extra payments.

These steps will help you understand your debt situation, reduce your spending, boost your earning, find free money, and pay off your loans faster. By following these steps, you can save money on interest, avoid late fees and penalties, and improve your credit score. You will also feel more confident, motivated, and in control of your finances. So don’t despair. Prepare yourself for an exciting journey ahead. Freedom from debt awaits you!

First Things First

The first step to paying off your student loans is to know what you owe, who you owe it to, and what your repayment options are. You can find this information by logging into the Federal Student Aid website or contacting your loan servicer. You should also check your credit report to make sure there are no errors or discrepancies in your loan accounts.

Knowing your loans will help you create a realistic budget and repayment plan that suits your financial situation. For example, if you have federal loans, you might be eligible for income-driven repayment plans that lower your monthly payments based on your income and family size. You might also qualify for deferment or forbearance, which allows you to temporarily pause or reduce your payments due to economic hardship or other reasons.

If you have private loans, you might have fewer options, but you can still try to negotiate with your lender for a lower interest rate, a longer repayment term, or a forbearance period. You can also consider refinancing your private loans with another lender that offers better terms and rates. However, refinancing might not be a good idea if you have federal loans, as you will lose the benefits and protections that come with them.

To know your loans better, you should answer the following questions:

• How much do you owe in total?
• How much do you owe for each loan?
• What are the interest rates for each loan?
• What are the minimum monthly payments for each loan?
• When are the due dates for each loan?
• How long will it take to pay off each loan?
• Who is your loan servicer for each loan?
• What are the repayment options for each loan?
• What are the benefits and drawbacks of each repayment option?
• What are the eligibility requirements for each repayment option?
• How can you apply for each repayment option?

You can use online calculators or spreadsheets to help you organize and analyze your loan information. You can also use apps or websites that can help you track and manage your loans more easily.

Related Reads

• How to Pay Back Student Loans: An In-Depth Guide
• How to Make Money Online: Quick and Easy Ways

Cut Your Expenses

The next step to paying off your student loans is to cut your expenses as much as possible. This means living below your means and avoiding unnecessary spending. Here are some ways to save money on your everyday expenses:

• Cook at home instead of eating out or ordering takeout. You can save a lot of money by preparing your own meals at home using simple ingredients and recipes. You can also plan your meals ahead of time and shop for groceries in bulk or on sale. You can also bring your own lunch to work or school instead of buying it from a cafeteria or vending machine.
• Use public transportation, bike, or walk instead of driving or taking a cab. You can save money on gas, parking, maintenance, and insurance by using alternative modes of transportation. You can also improve your health and fitness by getting some exercise while commuting. If you have to drive, try to carpool with others or use apps that can help you find cheaper gas stations or parking spots.
• Cancel or downgrade your cable, internet, phone, and streaming services. You can save money by cutting the cord and getting rid of cable TV. You can also switch to a cheaper internet plan or provider that meets your needs. You can also reduce your phone bill by using free or low-cost apps that let you make calls and send messages over the Internet. You can also limit your streaming subscriptions to one or two services that offer the most value for your money.
• Shop at thrift stores, garage sales, or online marketplaces instead of buying new clothes or gadgets. You can save money by buying second-hand items that are still in good condition and quality. You can also sell your unwanted items online or at a yard sale and make some extra cash. You can also swap items with friends or family members who have similar tastes and sizes.
• Use coupons, discounts, and cashback apps when shopping for groceries and other essentials. You can save money by using coupons that you can find online, in newspapers, or in-store flyers. You can also use apps or websites that can help you find the best deals and discounts on various products and services. You can also use apps or websites that can give you cashback or rewards for shopping at certain stores or online.
• Switch to a cheaper cell phone plan or provider. You can save money by switching to a prepaid or no-contract cell phone plan that offers unlimited talk, text, and data for a low monthly fee. You can also compare different cell phone providers and plans and find the one that suits your needs and budget. You can also use your own phone or buy a refurbished one instead of getting a new one with a contract.
• Cut back on entertainment, hobbies, and subscriptions that are not essential. You can save money by limiting your spending on things that are not necessary for your survival or happiness. You can also find free or low-cost alternatives for entertainment and hobbies. For example, you can watch movies or shows on free streaming platforms or borrow DVDs from the library. You can also read books or magazines online or from the library. You can also play games online or with friends. You can also learn new skills or pursue your passions online or in person.
• Use free or low-cost resources at your local library, community center, or online for learning new skills or having fun. You can save money by taking advantage of the free or low-cost resources that are available in your area or online. For example, you can take free or cheap classes, workshops, seminars, and webinars on various topics and subjects. You can also join clubs, groups, or organizations that share your interests and goals. You can also access free or cheap tools, equipment, and materials that you can use for your projects or hobbies.

Increase Your Income

The third step to paying off your student loans is to increase your income as much as possible. This means finding ways to earn more money from your current job or finding a new one. It also means finding side hustles or gigs that can supplement your income. Here are some ideas to boost your income:

• Ask for a raise or promotion at your current job if you have been performing well and adding value to the company. You can increase your income by asking for a raise or promotion if you think you deserve it. You should prepare a list of your achievements, contributions, and goals and present them to your boss in a professional and confident manner. You should also research the market rate for your position and industry and negotiate accordingly.
• Look for a new job that pays more or offers better benefits and opportunities for growth. You can increase your income by looking for a new job that pays more than your current one. You should update your resume and cover letter and highlight your skills, experience, and achievements. You should also network with people in your field and apply for jobs that match your qualifications and interests. You should also prepare for interviews and follow up with potential employers.
• Sell your unwanted items online or at a yard sale. You can increase your income by selling your unwanted items that are taking up space in your home. You can sell them online on platforms such as eBay, Craigslist, or Facebook Marketplace. You can also sell them at a yard sale in your neighborhood or at a flea market in your area. You should price your items reasonably and take good pictures and descriptions of them.
• Use your skills or talents to offer freelance services online or in person. You can increase your income by using your skills or talents to offer freelance services to clients who need them. For example, you can offer writing, editing, proofreading, graphic design, web development, photography, and video editing services online on platforms such as Upwork, Fiverr, Freelancer, or other freelancing platforms. You can also offer tutoring, coaching, consulting, and teaching services in person or online on platforms such as Wyzant, Tutor.com, Udemy, and similar sites.
• Start a blog, podcast, YouTube channel, or online course and monetize it with ads, sponsorships, or products. You can increase your income by creating content that attracts an audience and monetizing it with various methods. For example, you can start a blog on a topic that you are passionate about and monetize it with ads from Google Adsense or other networks. You can also start a podcast on a topic that you are knowledgeable about and monetize it with sponsorships from companies that are relevant to your niche. You can also start a YouTube channel on a topic that you are good at and monetize it with ads from YouTube Partner Program or other networks. You can also start an online course on a topic that you are an expert in and monetize it with products such as ebooks, courses, memberships, and more. You can create and sell your online course on platforms such as Teachable, Udemy, Skillshare, and other similar platforms.
• Join a ride-sharing, food delivery, grocery shopping, pet sitting, or house cleaning app, and work whenever you have spare time. You can increase your income by joining an app that lets you offer services to people who need them. For example, you can join a ride-sharing app such as Uber or Lyft and drive people around in your car. You can also join a food delivery app such as DoorDash or Uber Eats and deliver food from restaurants to customers. You can also join a grocery shopping app such as Instacart or Shipt and shop for groceries for customers. You can also join a pet sitting app such as Rover or Wag and take care of pets for owners. You can also join a house cleaning app such as Handy or TaskRabbit and clean houses for clients.
• Participate in online surveys, focus groups, product testing, mystery shopping, or user testing websites and earn cash or gift cards. You can increase your income by participating in online surveys, focus groups, product testing, mystery shopping, or user testing websites that pay you for your opinions, feedback, or experiences. For example, you can join online survey websites such as Swagbucks, Survey Junkie, InboxDollars, etc., and answer questions about various topics and products. You can also join online focus group websites such as Respondent, User Interviews, or FocusGroup.com, and share your thoughts on various issues and trends. You can also join online product testing websites such as Pinecone Research, Product Testing USA, or BzzAgent., and test new products before they are launched. You can also join online mystery shopping websites such as BestMark, Market Force, and Secret Shopper, among others, and evaluate the quality of service and products at various stores and businesses. You can also join online user testing websites such as UserTesting, Userlytics, or TryMyUI, and test the usability and functionality of various websites and apps.
• Tutor students online or in person in subjects you are good at. You can increase your income by tutoring students who need help with their academic subjects or test preparation. You can tutor students online on platforms such as Chegg Tutors, TutorMe, Wyzant, and others, or in person on platforms such as Varsity Tutors, Tutor Doctor, and Club Z Tutoring. You can set your own rates and schedule and choose the subjects and levels you want to teach.
• Teach English online to students from other countries. You can increase your income by teaching English online to students from other countries who want to learn or improve their English skills. You can teach English online on platforms such as VIPKid, Qkids, EF Education First, etc. You can set your own hours and earn up to $25 per hour depending on your qualifications and experience.

Apply for Grants and Scholarships

The fourth step to paying off your student loans is to apply for grants and scholarships that can help you reduce your debt. Grants and scholarships are free money that you don’t have to pay back. They are offered by various organizations based on different criteria such as academic merit, financial need, community service, leadership potential, personal background, and the like.

You can find grants and scholarships by searching online databases such as Fastweb, Scholarships.com, or College Board. You can also check with your school’s financial aid office, local community groups, professional associations, or employers, for opportunities that match your profile and interests.

When applying for grants and scholarships, make sure you follow the instructions carefully and submit all the required documents before the deadline. You should also write a compelling personal statement or essay that showcases your achievements, goals, challenges, and passions. And don’t forget to thank the donors and keep them updated on your progress.

Make Extra Payments

The fifth and final step to paying off your student loans is to make extra payments whenever you can. Extra payments will help you reduce the principal balance of your loans, which will lower the interest you pay over time. This will also shorten the repayment term and save you money in the long run.

You can make extra payments by using any extra money you have left after covering your essential expenses and saving for emergencies. You can also use any windfalls such as tax refunds, bonuses, gifts, or inheritance, to pay off your loans faster. You can also use the debt snowball or debt avalanche methods to pay off your loans in order of smallest to largest balance or highest to lowest interest rate, respectively.

When making extra payments, make sure you specify that you want the extra amount to be applied to the principal of your loan, not the interest or future payments. You should also check with your lender if there are any prepayment penalties or fees for paying off your loans early.

To make extra payments more effectively, you should follow these tips:

• Automate your payments. You can set up automatic payments from your bank account to your loan servicer every month. This will ensure that you never miss a payment and avoid late fees and penalties. You can also set up automatic transfers from your checking account to your savings account every time you get paid. This will help you save money for extra payments without thinking about it.
• Round up your payments. You can round up your payments to the nearest $10, $50, or $100 depending on your budget and preference. This will help you pay off more of your principal every month without feeling a big difference in your cash flow.
• Make biweekly payments. You can make biweekly payments instead of monthly payments by dividing your monthly payment by two and paying it every two weeks. This will help you make one extra payment per year without noticing it.
• Use a payment tracker or app. You can use a payment tracker or app that can help you monitor your progress and motivate you to keep going. For example, you can use a spreadsheet or a website such as Unbury.me or Undebt.it to calculate how much you can save by making extra payments and how long it will take to pay off your loans. You can also use an app such as ChangEd or Qoins that can round up your purchases and use the spare change to pay off your loans.

Time to Take Action

In this post, we have shared with you a realistic and effective plan to pay off your student loans even when you are broke. This plan consists of five steps that will help you manage your debt and work towards financial freedom. These steps are: know your loans, cut your expenses, increase your income, apply for grants and scholarships, and make extra payments.

You can achieve your goal of paying off your student loans and becoming financially independent by following this plan. Remember, every little bit counts, and every payment brings you closer to your goal. So don’t give up, and keep working hard. You can do this!

Now it’s time to take action and start implementing this plan. To help you get started, here are some resources and tips that can help you along the way:

• Use online calculators or spreadsheets to organize and analyze your loan information.
• Use apps or websites that can help you track and manage your loans more easily.
• Use online databases or websites to search for grants and scholarships that match your profile and interests.
• Use a payment tracker or app that can help you monitor your progress and motivate you to keep going.
• Join online communities or forums that can offer support, advice, and inspiration from other people who are in the same situation as you.

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