How to Afford Travel When You Have Student Loan Debt
Student loans can end up being a major financial burden. More than 45 million Americans have student loan debt, with an average monthly payment of $393. Having this kind of debt can hold you back from doing what you love, including traveling.
Fortunately, there are some things you can do to pay down your balance faster. Here are some tips on how to tackle student loan debt and get back to exploring the world.
Set Realistic Goals
You might want to hold off on any last-minute getaways and spontaneous adventures when you’re in debt. When you don’t set a budget, you’re much more likely to overspend. But, with careful planning you can enjoy your trip and still afford to make your monthly loan payments.
Think about where you want to go and when, and of course how much it will cost. From there, you can evaluate your financial situation to see how much you can afford.
Start by looking at monthly income expenses, including your student loan payments. An app such as Mint or YNBAB can help you organize and keep track of your budget.
If you haven’t already, be sure to set aside money each month for an emergency so that you’re prepared for the unexpected. It would be a shame to end up spending your travel money on something like a car repair.
Take a look at how much money you have leftover. If possible, carve out something for a travel fund. Even if you can only afford to save a small amount each month it will add up over time.
If you don’t have enough to start saving for travel, consider cutting other expenses. Are you paying for an expensive gym or other membership that you don’t use? Can you cut down on DoorDash? You might be surprised to find out how much room you can make in your budget.
But, there’s also the possibility that you’re spread too thin. When you have a large monthly student loan payment, it can be difficult to find extra money for travel. If that’s the case, you may want to look into ways to lower your payment amount or pay off your balance faster.
How to Pay Down Your Balance Faster
You may decide that you’d rather wait to travel until you’re completely debt free. One of the easiest ways to pay down your student loan balance is to make extra payments toward the principal whenever possible.
Your regular monthly payment includes principal and interest. Interest is a fee that your lender charges you to borrow money. Interest is charged as a percentage of your principal balance. So, as you pay down your balance, you start to pay less in interest.
As part of a Covid-19 relief effort, the U.S. Department of Education has temporarily placed all federal student loans in administrative forbearance with a 0% interest rate. Students are not required to resume payments until at least September 30, 2021.
But, if you continue making your payments (or make any payments at all) they will be applied directly to your principal balance.
Keep in mind, however, that the student loan payment pause and interest waiver only applies to federal student loans. If you have private student loans, check with your lender to learn how to make principal-only payments.
Lower Your Monthly Student Loan Payment
Everyone has their own priorities, and you might not want to wait to travel. As long as you have a plan in place to pay off your student loans, you can set aside money for other things.
One way to potentially free up more funds for travel is to refinance your student loans. When you refinance, you take out a new loan with a lower interest rate to pay off your current loan.
The new, lower interest rate will likely result in a lower monthly payment obligation. Lower monthly payments = more money to spend on travel.
Apply for Student Loan Forgiveness
Depending on where you work, you may be eligible for Public Service Loan Forgiveness (PSLF). Many public school teachers, nurses, police officers and other government and non-profit workers qualify, as long as they are employed full-time.
After making 120 qualifying payments, your remaining federal student loan balance is forgiven. Unlike an income-based repayment plan, the debt cancellation is not treated as income to the borrower.
There may also be a way to have your student loan debt forgiven while traveling. For example, you might qualify for PSLF if you volunteer full-time for the AmeriCorps or Peace Corps. You can explore places like Costa Rica, Belize and Peru and not have to worry about your student loan debt.
The Bottom Line
Plenty of young adults miss out on important milestones because of their student loan debt. But before you let your student loans ruin your travel plans, take a close look at your financial situation. With a clear picture of what you need to achieve your goals, your travel dreams can once again become a reality.