The Best Ways to Tackle Your Student Loan Debt

05/19/2015 01:27 pm ET | Updated May 18, 2016

I have over $150,000 in student loans. What is the best way to tackle this debt, on a $50,000 salary?: originally appeared on Quora: The best answer to any question. Ask a question, get a great answer. Learn from experts and access insider knowledge. You can follow Quora on Twitter, Facebook, and Google+.

Answer by Ariana K Lema, B.S. Resource Economics

I believe the rule of thumb is to not take out more in student loan debt for an education than you expect to earn as an annual salary. However, none of this matters now, so I won't go on with scolding. You may regret the amount you have taken out for your education, but never regret having received a quality education.

Here are some of the things you should do if at all possible. Yes, if possible -- and I don't mean if you feel like it or would prefer to. These recommendations are on the basis of not being married or having children in the near future.

We'll assume you're taking about 25% out of your earnings for deductions (health, retirement at 5% income, etc.) and taxes. You should be on the 25-year plan for the loans, and if not, find a way to switch because there is an option for that. Ideally, you would be able to consolidate to a 15-year plan, but I'll use my example based on the 25-year.

Now, you are going to pay these off in fewer than 25 years, but it's safer to have a lower payment just in case you have other obligations. Let's say your monthly loan payment is $525 at the minimum payment on this plan. After taxes, deductions and loan payments, you have about $2,600 left over.

Make a monthly budget based on this -- rent, electricity, additional healthcare costs, other utilities, Internet, transit pass or gas, maintenance if you have a car, cell phone plan, etc., and put whatever you can toward an emergency fund until you have enough to cover two to three months of necessary expenses. For you, an emergency fund would be $1,100 at the minimum, but more likely should be upwards of $3,000 to be safe.

Below are a few suggestions for tackling student loan debt:

  • Make a 10-year timeline of what you want to do and where you want to be. I'm not talking specifics, but just generally. Tell yourself you can overcome this debt within 10 years. Know that you can and that you will. The first step is having faith in yourself. Tell yourself you can overcome this debt within 10 years. Know that you can and that you will. The first step is having faith in yourself.
  • Consider your spending habits and how you can change them easily before getting into the harder aspects.
  • Move back home for a set time period. Stop paying rent, fees, etc. If you can do so, move home. Even if parents/grandparents/etc. charge you rent, it'll probably be less than what you're paying now or would be on your own. If you cannot move home, find roommates. Live in a room in a house in an average neighborhood where the cost will be much lower.
  • Don't have more than one credit card. You won't need it and it's unnecessary temptation. Credit card interest is worse than student loan interest. You can't save money if you're paying off credit cards because of the rates. Also, make that credit card one with good cash back. Given that you're not making a ton of money, a good bet is the DiscoverIt card. It also gives you your credit score every month, which is a cool feature and handy to know. As I searched for the best credit card, this one stuck out and still does as a good option for younger people. Just avoid the ones with monthly fees.
  • Don't pay any banking fees. Google your way to many examples of how to make this happen.
  • Consolidate your loans for the lowest rate if you haven't already. Shop around, get rate quotes from several banks, big and small.
  • Make sure you are putting 5% or so into your 401(k) every week through automatic deductions at work.**
  • Invest in index funds and ride out the recessions and booms. Anyone under 35 is in a great position to do this. It's really just "invest and forget" with index funds, until you need to switch it up in later years. Investing is an entirely separate lesson, however -- plenty of good advice on Quora for that. In short, S&P is usually solid. However, I've had success with the NASDAQ. Just make sure you choose a good fund or index when you invest and be sure to check out fees.
  • Stop drinking. Stop recreational drugs. Stop smoking. Stop Starbucks. Stop going to the casino. Stop all of the things that eat away at your paycheck every week, whatever your vice is.
  • If you need to go out with coworkers to fit in and network to get that promotion, order cheap drinks. Or, order one expensive drink and sip it slowly with water on the side. Trust me, they won't notice. If they do, change the subject. It's not a big deal. If your friends ask why you aren't going out as much, you don't have to even mention debt. Say something like, "I'm saving for a down payment on a house." No one should argue with that goal, or whatever you come up with.
  • Realize how regular spending can affect your ability to achieve financial freedom and get out of debt. Spending money is not the right way to cope with not having enough money.
  • Eat at home more and go out to eat less. Eat leftovers. If you make good food that is better for you, it's helpful long-term too.
  • Pack lunch: A sandwich and an apple from home is cheaper than Panera.
  • Set up direct deposit to your checking account from work, then set up an automatic transfer to your savings to happen at the same time. Out of sight, out of mind. With student loans, automated payments can sometimes get you a rebate on the interest rate of .25%, which can add up.
  • Automate everything to go where it needs to go: savings, retirement, credit card, rent if you have it. I have more than one savings account so I can separate rent and utilities in one, general savings in another and anything I will spend in less than 30 days in my checking. Organizing your finances is crucial. You don't want to forget about your cell phone bill and blow your cash on a night out.
  • Utilize Google Calendar for recurring due dates. Then add everything else you have to pay, but also add in fun things like holidays and days off. Pay day is also good to add if you're on a bi-weekly or irregular schedule. Stay organized.
  • If you can get a health savings account and you need prescriptions regularly, take advantage of that tax-free account as well with deductions. Prescriptions are expensive enough as it is.
  • If you can choose which loans to pay off first, go with the ones with the highest interest rates. Make sure you keep up with this each time you pay off a loan.
  • Downgrade your phone to something basic unless you absolutely need it for work. Minimize your data. Try to get on your parents' plan for collective savings if possible.
  • Avoid financial advisers. They are a waste of money.
  • After establishing your two to three month emergency fund over a few months (to cover necessities), start aggressively paying down your debt. Throw as much at the principal as you possibly can without tapping into your savings. Start with high-interest first.
  • If you are able to consolidate all of your loans to one low-interest rate, congratulations; just tackle that. More likely, you will have several loans, even if some are consolidated, at different rates. Make the minimum payments on the low rates and pay down the principal on the high-rate loans.
  • Put all of your loans in a spreadsheet with the total amount paid to-date, amount owed, interest rate and the minimum payment on it per month. If you're good with Excel, set up a calculator to determine the interest in dollars to be owed on each loan and how much you have saved by paying X amount so far. However you set it up, update it monthly and track your progress. It may not be the same every month -- things come up -- but watching your progress is crucial and can be motivating after you get a few months going. watching your progress is crucial and can be motivating after you get a few months going.
  • Cut down your TV subscription to basic cable, or cancel it completely if you don't find it necessary. Also downgrade your Internet to something very cheap unless you're in an industry, position or department that requires you to work from home with high-speed Internet.
  • Cut subscriptions as much as possible, whatever they may be. Don't get more magazines that you actually read. Don't pay Netflix or Hulu if you don't use their services regularly.
  • Don't go five years without being promoted. If you aren't moving up or getting raises, look elsewhere -- even if casually. Opportunities are always popping up when you don't need them.
  • Use public transit. Walk to work if you're close enough or bike. Commuting by car is almost always more expensive when you consider maintenance, gas, the need to replace it as it gets old, paying for parking, etc. And if you have to get stuck in traffic, it isn't terrible to be sitting on a bus or train reading. Commuting by public transit is increasingly the way of the future. If you have no access to public transit, obviously you don't have the same luxury of choice. Take care of your car -- it's one of those expenses that is easy to forget about.
  • Take care of your health. Exercise and eat well. As I've said, prescriptions are expensive. So are specialist doctors and life-long diseases that could have been prevented. Take advantage of the preventative care options your health plan offers you.
  • Stay realistic with your financial goals, but also keep your sanity. Take your paid vacation days, don't cash them out, don't burn out. Set aside money to do something you love at least once a month -- whether that is going out to a bar/party, affordable concert, a few trips to the movies, day trip, spa day, whatever. I would cap this spending at100-150.
  • Pick up cheap or free hobbies (hiking, programming, reading, yoga, etc.) but don't feel like you can't treat yourself because you're in debt. It's just about moderation. You may find that you enjoy the simpler lifestyle, or at least get used to it.

Don't listen to everything I've told you or think that I'm trying to push you. Just soak it all in and do what you can to best fit your needs and specific situation. Just realize that whatever you do, it will likely require a lifestyle change if you're serious about achieving financial freedom. You'll be very happy that you did.

Again, and finally, take care of yourself and good luck.

**Now don't tell me this is no time to money put toward retirement. Now is always the time, at least in small amounts. While I fully advocate 10% of income, with debt like this, 5% makes more sense so you still have the resources to pay it down. Our generation and many of our parents are finding that holding off on retirement savings till mid 30s or even 40s is just too late. If you have a 401(k) from your work, use it. If you have a Roth IRA, take advantage of it. Both of these are tax-free. Don't punish yourself both now and later for having debt. Retire comfortably.

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