There are a few proven rules of thumb to follow when it comes to financial health. One is to try to pay off student loan debt as fast as your budget will allow.
Hitting fast forward when paying off student loans is a wise step that sets you up for overall financial wellness. Paying off or even just reducing student loan debt improves your debt-to-income ratio, a critical factor for a healthy credit history and credit score.
Your wallet will thank you, as well. When you send in that last payment earlier than scheduled, you pay out less in interest during the life of your debt, saving you money on the overall costs of the loans.
There are numerous repayment options for federal student loan borrowers, but those might not fit every person’s situation. Before you hit the accelerator on student loan payoff, it’s critical to remember that early payoff only makes sense once you’ve built a solid financial foundation, such as building up emergency savings and managing other debt such as high-interest credit cards.
With that in mind, here are some of the more creative ways borrowers have reduced or paid off student loans ahead of schedule:
— Watch for windfalls.
— Think outside the paycheck.
— Game the change.
— Find fives.
— Stay current.
Watch for Windfalls
Have you recently discovered funds you didn’t think you had, such as a forgotten savings account, cash rewards from a consumer credit card or even a rebate from a recent purchase? Have you recently received a raise? If you should be so fortunate, apply those funds directly to your student loan debt before you’re tempted to use any “found” dollars for something else.
Over the long haul, applying these types of windfalls to your student loans will save you hundreds and maybe even thousands of dollars in interest when you earmark those funds for student loan repayment.
Think Outside the Paycheck
Some borrowers start a side hustle to help pay off student loans. Additional creative ways to supplement your 9-to-5 paycheck include signing up for online user research. Many websites offer a stipend for people to help test products or websites, complete surveys and more.
You might also explore flea markets and garage sales, buying great items for cheap and reselling them on Facebook Marketplace, eBay or other platforms. Be sure to price each item for a healthy return on investment, and set aside the supplemental income each month for an extra student loan payment.
Game the Change
You might as well make it fun when it comes to paying down student loans.
Set up monthly money-saving challenges with family or friends. See who can stay accountable to a “no-restaurant challenge” where you cook at home or bring a bag lunch to work for a week. Cut out other “nice to have” monthly purchases like fancy coffees or impulse online purchases and see who can stick to the goals. Use the savings to make an extra student loan payment, and watch those loan balances drop.
One of the more creative strategies is to save $5 bills each month. Save them in a jar or envelope, and at the end of every month deposit them into a bank account, where they are then used to make an extra student loan payment. Following this simple rule consistently, it’s possible to shave a few years off a typical 20-year repayment term — and save hundreds or thousands of dollars in interest.
The gig economy is constantly changing. New opportunities to earn extra cash pop up regularly. For instance, long-time player DoorDash still offers a way to make extra money as a part-time delivery person.
It can also pay to check out newer opportunities. For example, Gopuff is a recent entry into the gig economy located in both metro and college regions. The company pays part-time drivers to deliver food and beverages, as well as consumer goods housed in Gopuff’s local fulfillment centers. Work when you want and sock away the extra money to accelerate student loan payoff.
When exploring ways to eliminate your student loans faster, remember that your financial picture is specific to your current situation. For some borrowers, paying off student loans early saves money, reduces stress and improves overall financial health. Consider these tips as well as your finances to understand the best option for you.
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