Keeping up with payments on your student loans can be particularly difficult just after you graduate. It’s unlikely that your salary will allow you to make extra payments, assuming you even have a job. You may need to get a side job or reduce expenses if earnings from your primary job aren’t sufficient for you to make minimum payments. You may even find it necessary to restructure your debt if you wish to meet your goals for paying off your loans. The following six tips will help you tackle your student loans in 2020.

1. Consider consolidation

Consolidation is the bundling of multiple loans into a single loan. It doesn’t necessarily reduce your interest rate (although it may), but it does make it easier to stay organized. Since you need to make only one payment each month, you will be less likely to skip or overlook a payment due date.

You will need to consider several factors to determine whether consolidation makes sense for you. A larger balance on one loan might increase your interest rate, so you may have to pay more interest if you consolidate. Consolidation also prevents you from attacking individual student loans with the highest interest rates, which is particularly helpful when the rates on your loans vary greatly. This is often the case when you have a mix of government and private loans, because private lenders typically charge a significantly higher interest rate.



2. Refinance your student loans

Refinancing your student loans is an easy way to pay them off more quickly, provided the interest rate on the new loan is low enough to justify its closing costs. Refinancing opportunities occur when rates drop after you have taken out the original student loans.

Deciding whether to refinance requires you to calculate the average interest rate on all your current student loans. If you’re able to refinance at an interest rate that’s at least one percentage point lower than the average interest rate you’re paying now, refinancing should be well worthwhile. Even with a reduction of half a percentage point, refinancing may still be worth it depending on your lender’s closing costs.

The best time to refinance your student loans is when interest rates are near historic lows, as they are now. For example, the interest rates on Figure’s student loan refinance4 currently start at 4.25% APR5 as of February 2020. This rate includes a discount of 0.25% for customers who use auto pay. It also assumes the applicant has a credit score of at least 800, with discretionary income of at least $5,500 per month. To qualify for the lowest rates, applicants must select a term of five years, as longer terms will have a higher rate. The variable rate for this loan is based on the London Interbank Offered Rate (LIBOR) as published in the Wall Street Journal.



3. Make more than the monthly minimum payment

Making more than your minimum payment each month is particularly helpful in reducing student loan debt, because the entire additional amount goes toward principal. Even if you pay only a little more than the minimum, you will save money in the long run due to the reduction in interest costs. While one-time payments from a bonus or birthday money won’t provide as much benefit, you can still use them to pay off your student loans more quickly.

Another strategy is to make biweekly payments instead of monthly payments, provided your lender allows this option. By paying half your monthly payment every two weeks, you’ll end up making the equivalent of one extra payment each year. Splitting your payments up in this way also will make it much less noticeable than if you were to simply pay an extra lump sum all at once.



4. Reduce your housing expenses

Housing expenses account for about a third of the average American’s after-tax income, so they present an obvious target for reducing recurring expenses. Many students move back in with their families while they pay off their student loans, which can save tens of thousands of dollars each year. This savings can then be used to pay off your student loans more quickly, often within a year. Another option for reducing your housing expenses is to bring in a roommate or roommates.

You can also look for a cheaper place to live, with the goal of getting your housing costs as far below one-third of your after-tax income as possible. Assume for this example that you’re making $50K per year after taxes, and you’re able to get your housing costs down to $1K per month. One-third of your post-tax income would be about $1,388 per month, which would allow you to pay an extra $388 per month toward your student loans should you choose to do so.



5. Increase your income streams

Your salary from your regular job may make it difficult to pay off your student loans more quickly, especially if you’re early in your career. More Americans than ever take on side jobs and use the additional income to pay off debt. The gig economy makes it easier to generate extra income from home, eliminating the need for additional commuting and allowing you to work when it’s convenient for you. Common services that can be performed online include writing, customer service and virtual assistants. Many businesses allow part-time employees and contractors to work from home in exchange for not receiving the fringe benefits of full-time employees.



6. Apply annual raise toward your loans

If you’re able to pay your basic living expenses with your current salary, you can apply any raise toward your student loans without compromising your standard of living. Aon’s 2019 U.S. Salary Increase Survey shows that salaries in the U.S. will increase by an average of 3.2% in 2020. If your after-tax income is $50K and you get a 3.2% raise, this would allow you to pay an extra $1,600 per year toward your student loans.



Summary

Combining these tips will help you pay off your student loans even faster. The savings that you’ll realize in the long run should be well worth the short-term sacrifices you’ll need to make.