- Paying off student loans is daunting, but starting with one area of spending can make it easier.
- People who have paid off their loans reduce their food spending, housing costs, and other savings.
- Some married couples lived off one income while allocating the other’s salary to debt payoff.
- This article is part of the “Better, Smarter, Faster” series focused on the effective choices you can make with your money to fulfill big life goals.
When making resolutions about paying off student loan debt, it’s easy to set unrealistic goals and focus only on the big picture. But instead of overhauling every dollar you spend, it may be easier to look at the details: Reduce spending in one area of your budget at a time, working gradually to achieve your debt payoff goal.
We asked seven people who paid off their student loans which changes made the biggest difference.
Table of Contents
1. Be mindful of food spending
“At one point, we were spending $1,000 on food,” says credit expert Jasmine McCall, who worked with her husband Jay to pay off $96,452 in student loan debt in four years, about her monthly spending. Once they got that reality check, the McCalls focused on cutting back on groceries and eating out before addressing other areas where they could cut back.
The McCalls also lived on Jay’s $85,000 salary while putting Jasmine’s entire $88,000 salary toward their student loan debt. Living on one partner’s salary while using the other partner’s salary to pay debt is a common strategy that couples use to make the debt repayment process go by faster.
2. Cut back on rent where possible
Imani Porter in Washington, DC, and Danielle Desir in Connecticut both moved in with their families while paying down their student loan debt. Not everyone has the privilege of relying on family to save on rent, but both Porter and Desir say it helped their debt payoff journey go faster. Porter paid $25,000 worth of debt in one year, while Desir paid $61,823 in four years.
Software engineer Nickolas Natali moved into a van for one year to drastically cut his living expenses and pay down $59,000 in one year. However, Natali doesn’t recommend van life for everybody. He tells Insider, “I was peeing in a bottle and ducking under curtains being held up by magnets so no one could see me, and yeah, it was not sexy at all.”
3. Re-evaluate insurance needs
After getting laid off from her job, debt payoff coach Ja’Net Adams took a hard look at her family’s finances to see where she could save money. Because Adams had worked in pharmaceuticals, free health insurance was usually part of the benefits package. Once she lost her job, she had to look for coverage elsewhere. “Thank goodness it was the time that Obamacare took place,” Adams tells Insider.
She also called her home insurance and car insurance providers to see if she qualified for a lower rate or if there was a cheaper package available. “We had too much
and too much home insurance,” Adams says. “We saved $300 to $400 per month just by cutting back.”
Once she found a new job, she was able to fast-track her debt payoff process by keeping those same insurance budget cuts in place.
4. Take a look at 401(k) contributions
With a combined income of $125,000 per year, Ashley Patrick and her husband were contributing 11% to their 401(k). A 401(k) plan is an employer-sponsored retirement account that allows you to put part of your paycheck, before taxes, into an investment account that accrues compounding interest.
To prioritize paying down high-interest debt, both Patrick and her husband paused their 401(k) contributions to focus on paying down $25,000 of student loans in just 10 months.
This isn’t to say that it’s necessarily recommended to stop retirement contributions in the long term. Because retirement savings are investments that rely on compound interest, saving as soon as possible makes an enormous difference. If you do decide to pause retirement savings for debt payments (or perhaps just reduce them temporarily), make sure you don’t forget to resume them in the future.