Investing

Student Loans And Budgeting: How To Get Ahead


It is hard enough that you have to pay a chunk of your salary to loan servicers at the beginning of each month.

Now you have to budget too?

Budgeting efficiently in situations where cash is tight, is difficult.

No lie.

However, it is possible to win at both: aggressively paying off your student loans while maintaining a budget that has you winning financially.

In this post, I’ll share some pointers to help you get there. Before diving in, check out our favorite free tool to help you budget: Personal Capital. Start tracking all your accounts today online for free.

Decide It’s Possible And Form The Habit

One of the top reasons why people fail at things – diets, exercise routines, careers – can be linked to mindset.

If in your mindset, you think it is absolutely impossible for you to be successful at budgeting and getting your financial life together, there is no number of books, videos, courses or blog posts that can change your mind.

In fact, there is a name for it – “a fixed mindset”.

Yes. This is a real thing that has been described by psychologists.

Contrast that with a “growth mindset” – where individuals are more likely to succeed because even though a problem presented to them seems impossible to crack, they already come into the problem thinking “No matter what it is, I am going to find a way around the problem.”

So the first thing is to begin to see budgeting and paying off your student loans as a very “crackable” problem.

This is where habit-forming begins to come into the picture.

There are a number of ways to budget.

Have you researched them?

Which one appeals to you the most and jives with your personality?

The zero-based budget for instance is an excellent budget that tends to fit most personality-types.

In this budget, you assign every dollar that comes into your household a “job”.

This will involve you listing every single fixed expense you’re responsible for each month (rent, car note, student loan payment). After this, you will list all your variable expenses (e.g food). When you tally up all these expenses, and subtract it from your income, the result should be zero.

Using the zero-based budget, you can assign EXACTLY how much you will pay in student loans (even if you want to pay a little bit more every month), and in your variable expenses , you can assign an amount you want to save or put towards investments.

You can choose to do this the old school way – a good old pen and paper – or an Excel Sheet or with an app.

Check out my reviews of these budgeting apps to find which one will work best for you.

The top 8 automatic savings apps of 2018

Banktivity 6 Review

YNAB Review : The Best Paid Budgeting Software

Qapital Review : One of the best Automatic Savings Apps

Whatever budgeting style you choose to go with, the bottomline is to decide it is possible and just start!

Student Loan Forgiveness

Since we are talking student loans, budgeting and getting ahead, I’ll be remiss to leave out Student Loan Forgiveness.

Have you found out if you qualify for any type of student loan forgiveness?

Over 30 states provide student loan forgiveness programs for specific groups of people. Take advantage of those if you can.

Serving as a nurse, doctor, pharmacist or dentist in rural parts of the United States gives you also provides you an in to specific loan forgiveness programs.

Taking advantage of student loan forgiveness programs allows you to get rid of your debt faster and reach your financial goals quicker.

Income-Driven Repayment Plans

Another way to get ahead with your budget as you tackle student loans especially when you are in a financial tightspot is to look at income-driven repayment programs.

In general, while income-driven repayment programs can be good when you need something that fits your budget, it can prolong your repayment time.

Use it where necessary but as much as possible, as soon as your income situation improves, look at other avenues to pay off your student loans faster.

Attempt To Negotiate A Settlement

Did you know you can get on the phone with your loan servicers and negotiate a settle for significantly less than you owe? This only works for private student loans and Federal student loans in collections. For Federal loans, you can only potentially negotiate collection fees – not your loan itself.

Settlements are however only possible if you are willing to pay the lump sum of the lower amount – or over a short period of time.

For instance, you might be able to negotiate a $2,000 balance down to a $1,200 dollar settlement.

Typically, you will be require to pay all $1,200 right there OR, they might ask you to make three $400 payments over the next three months.

This works out for both you and the lenders, here’s why.

No matter what, the lender is getting some money back. Even if it is not for the FULL amount (which is usually mostly interest anyway – so either way they are still winning.)

It is a win for you, because the total amount you have to pay back is greatly reduced.

So while it might pinch a bit and you might have to put this in a “variable income” category for a month or two, once it is done, you are done with the loan!

Final Thoughts

It is entirely possible for you to balance your student loans with a budget…and get ahead. There is no suggestion that it is easy. But with some creativity, focus and determination, it can be done.

I am curious to know if you have balanced a budget with paying off your student loans in the past.

Let us hear them in the comments below.

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