How to pay off student loans without a degree
You鈥檝e decided to leave college. Maybe you鈥檙e becoming an entrepreneur, or you鈥檝e concluded that聽higher education聽isn鈥檛 right for you. Or maybe you can鈥檛 afford to stay in school.
Whatever your reason, during this time of starting anew, don鈥檛 forget about those student loans.聽Leaving school early means you鈥檙e more likely to fall behind on payments than someone who has聽graduated, according to a 2015聽.
Here鈥檚 how to pay off your student loans without that degree.
Pay off聽accrued interest during your grace period
You might be tempted to ignore your loans until your first bill comes due, but if you do, you鈥檒l be kicking yourself later. Why? Unless you have only subsidized federal loans, the amount you borrowed has been accruing interest since you first聽borrowed it. That interest will be capitalized, or added to your principal balance, when your grace period ends聽and your loan enters repayment 鈥斅爏ix months after you leave school, in most cases.
If you use your grace period聽to pay off your accrued interest and start聽making frequent payments 鈥� as little as聽$20 a week 鈥� you鈥檒l begin reducing your balance,聽instead of having most of your money go toward interest. Learn more about how to聽听辫补测尘别苍迟蝉.
Another way to save on interest: Put your loans on autopay. Typically, it鈥檒l reduce your rate by 0.25%.
If you can鈥檛 make payments yet, start by figuring out exactly where your loans stand. Make sure you know聽聽鈥� that鈥檚 the company聽that takes your payments. Then find out exactly how much you owe, your interest rates and the dates by which you鈥檒l have paid off your loans.
Get on an income-driven repayment plan
Leaving school without a degree can make it harder to find a well-paying job, which can make loan payments difficult. Millennials aged 25-32 who have a bachelor鈥檚 degree or better earn a median salary of $45,500 per year, while those who have a high school diploma earn a median of $30,000, according to 2014 data from the聽.
If you鈥檙e having trouble affording your federal loan payments,聽聽plans can provide relief by lowering your monthly payments and spreading them out over 20 or 25 years. In fact, depending on your circumstances, your monthly payment could be $0. Plus, the government will forgive any balance remaining at the end of your new term. You can apply for聽an income-driven plan either through your servicer or on the Department of Education鈥檚 website.
If you have private loans and can鈥檛 make the minimum payment, ask聽your聽lender聽about your options. Accredited financial counselor, educator and coach at Youth Smart Financial Education Services聽Roslyn Lash suggests creating a budget and showing that you can鈥檛 afford all your payments, then asking your lender聽if it can reduce your interest rate.
Develop your professional skill set
College may not have panned out for you, but it probably helped you hone a few soft skills, such as聽teamwork or problem solving, that can help you improve your earnings potential, even if you can鈥檛 find your ideal job right out of school. Start by identifying the skills you have and the ones you need to be successful in your chosen field, then seek out ways to fill in the gaps.
That could mean getting a mentor, looking into massive open online courses or taking advantage of training programs at your company, notes Hannah Morgan, a job search strategist and founder of CareerSherpa.net.
鈥淭here鈥檚 nothing that says employees can鈥檛 start a brown-bag lunch and work together to help each other learn skills,鈥� she says.
Get a side job
If you鈥檙e not earning聽as聽much as you need to make your payments 鈥� or you want to pay down your loans faster 鈥� consider taking on a side job that you can do聽remotely with聽relatively little聽time.
鈥淭he gig economy is exploding right now,鈥� says Austin Lewis, a certified financial planner and founder of Rooted Financial Planning. Lewis notes that over half of his clients have multiple income streams. 鈥淵ou can drive for Uber and Lyft, you can do TaskRabbit. There鈥檚 so many gig-economy jobs emerging that you almost don鈥檛 need a full-time job.鈥�
Ask for a deferment
If you absolutely can鈥檛 afford your monthly payments, a聽聽鈥斅燼 period during which you don鈥檛 have to make payments 鈥� can be a useful tool while you figure out your finances. It can also alleviate some of the pressure if you鈥檙e between jobs. And the government might even pay the interest on your federal loans during your deferment, which is not the case if you choose a forbearance period instead.
But, as Lash cautions, interest on private loans will continue to accrue during a deferment.
鈥淒ormant does not mean dead; you still have to pay it. And you either pay now, or you pay more later,鈥� she says.
Devon Delfino is a staff writer at聽NerdWallet, a personal finance website.聽Email:聽ddelfino@nerdwallet.com. Twitter:聽.
This article first appeared at .
