How to Pay Off Student Loans on a Low Income

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Zina Kumok

By Zina Kumok

February 24, 2020

When I graduated college, my monthly student loan payment was $350 a month. That’s not far off from the 2017 average of $393, so my loan balance was by no means out of the ordinary. I was only taking home $1,750 a month after taxes, so my student loans made up 20% of my net income.

Making ends meet on such a low income was a struggle, but I was able to pay off my entire student loan balance in three years. Some of it was about making sacrifices and shifting my priorities, but the most important thing I did was come up with a plan and stick to it. Here’s how you can do the same.

Make a Budget

Making student loan payments on a $28,000 entry-level salary proved to be tougher than anticipated, so I decided to create my first budget to get my spending habits under control. As it turns out, sticking to a budget is much harder than making one.

All of a sudden, I had to start paying attention to how much I was spending and what I was spending it on. The experience opened my eyes to just how easy it is to lose sight of where your money is going. I realized that if I really wanted to become debt free, the first step would have to be changing my habits.

You can make your own budget with a notebook, an app like Mint or a spreadsheet system like Tiller. The first step is to make a list of all your recurring monthly expenses, from utility bills, loan payments and food costs to discretionary categories like entertainment and shopping. Then, decide how much you want to allot each month for every category. After that, you’ll track your purchases and make sure to stay within the boundaries you’ve created.

It took me a few months before I could actually stick to the dollar amounts I allocated, but each month was a little easier than the one before. Eventually I actually started coming in under budget.

Need help creating a budget? Quicken is a budgeting software that allows you to connect your accounts and automatically categorize spending. Create a personalized budget and track and manage your spending.

Refinance High-Interest Loans

Private student loans make up less than 10% of the total student loan balance, but these loans often have higher interest rates and fewer repayment options. 

If you have private student loans, see if you can refinance your loans to a lower interest rate. This will reduce your monthly payment, allowing you to either pay off the debt faster or free up some cash for other expenses. If you have a $20,000 loan at 9% interest, for example, you’ll save $3,757 in total interest when you refinance to a loan with 6% interest.

Some borrowers with federal loans should also consider refinancing, but be warned that this can come with unexpected consequences. If you refinance federal loans, you give up all associated protections like deferment, forbearance, any federal loan forgiveness, and Public Service Loan Forgiveness eligibility.

When choosing a lender for refinancing a student loan, see which can offer the best interest rate. There are other factors to consider, too, including loan perks. For example, SoFi offers free personalized advice from credentialed advisors and the option to refer friends and family for a potential $300 bonus. 

Cut Expenses

When you have a low income and want to repay your student loans quickly, you need to slash expenses ruthlessly.

As a 22-year-old, I learned this lesson the hard way. After formulating a budget, I realized that my financial goals and my lifestyle were more than just at odds – they were living on completely different planets. It was a tough pill to swallow, but I slowly started to chip away at my spending habits.

I stopped eating out, buying craft beer and shopping for new clothes. I discovered thrift stores and drugstore duplicates for pricey makeup. I went to the library for books and DVDs. These changes didn’t happen overnight, but with each sacrifice I came closer to making ends meet.

Look at your budget and see where you can save money. This might include obvious solutions like bringing your lunch to work or inviting friends for a potluck instead of dinner at a restaurant. It could also include quirkier choices like lowering the temperature on your hot water heater or seeking out free entertainment opportunities at a local university.

Earn More Money

This one might seem obvious, but sometimes people get too caught up in trying to make the most with what they have. You always have the option to make more money, and there are plenty of ways to do it without getting a second or third job.

When I was struggling with my student loans, I first tried making more money by taking online surveys. That only ended up making me about $10 a month, so l started looking for more profitable avenues.

I discovered that many banks offer bonuses between $100 and $200 if you open a new account, transfer a certain amount and set up direct deposit. In one year, I earned about $1,000 doing this – all of which I applied to my student loans.

After doing that, I started freelance writing for some of my former journalism clients. I made more money doing this than other side hustles because I had unique expertise in the field and could charge more. Eventually, I expanded that business to a full-time career.

Make a list of your hobbies, interests and skills. Find a way to monetize those to increase your income. If you like knitting, try making gloves and scarves you can sell on Etsy or to family and friends.

If you don’t think you have any special skills – and you have some spare time – then a part-time job is a perfectly viable option. You can also ask for overtime at work, try to get a promotion or look for a higher-paying job.

At, our goal is to help you make smart decisions about saving and paying for education. Some of the products featured in this article are from our partners, but this doesn’t influence our evaluations. Our opinions are our own.

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