10 Ways to Save to Pay off Student Loan Debt

By Aaron Crowe, dealnews contributor

For new college grads, a mound of debt isn't the best way to start a career. While Congress debates whether to double the interest rates on federal loans for college students on July 1, the average graduate will have student loan debt of $25,250. And that's enough to make many entry level job seekers want to return to college and defer paying back their loans.

Student loan debt can put recent grads behind in saving for a rainy day, making major expenditures (like a home or retirement) difficult to muster. We've already covered some basic ways to save money that can add up fast to major savings, such as quitting smoking and using a library card. These and other cost-cutting measures all add up to savings that can be put toward paying off student loans as quickly as possible. While some of the steps below may yield intangible results, they will all assist in keeping more money in your pocket — as much as $6,100, in fact.

1. Break Out the Piggybank

You've probably got a piggybank somewhere at home, even if it's a relic from childhood. Mike Sena, a certified financial planner in Georgia, recommends the "don't spend a dollar bill" method of saving, which means that you keep every dollar bill in your posession. If it has a picture of George Washington on it, keep it. Pay for things with a $5 bill or the coins you have in your pocket and hoard your $1 bills at home or in a bank account to use at the end of the year to pay off as much of a student loan as you can.

Potential Savings: $720 per year, based on saving $2/day.

2. Eat Out Less

Either by skipping the daily $5 latte, bringing a bag lunch to work, or skipping dining out altogether, you can save hundreds of dollars each month. And, when you must go out, be sure to visit establishments that offer a deal. There are a bunch of free apps that facilitate finding special promotions and happy hour discounts at both bars and restaurants.

Potential Savings: $100/month, or $1,200 annually

3. Say No to Plastic

A student loan is enough debt to start a career with. New grads shouldn't continue the debt cycle by using credit cards to buy things they can't afford. Sena recommends literally freezing any credit cards in a cup of water in your icebox to quell the desire to splurge. Pay for things with cash and you'll experience a more emotional connection to your money that you don't get with plastic. "If people can learn the value of cash, they can have a greater appreciation of money," Sena says.

The average household owes $15,956 in credit card debt, and using an online calculator to determine how long making the minimum payment will take to pay it off is depressing.

Potential Savings: $50/month in late fees if you don't pay on time, or about $600 annually

4. No Car Payments

For many recent grads, owning a car might be a necessity in life; if you can, it's best to buy a car entirely with cash, although this is likely next to impossible for many. But consider the fact that it's far more economical to opt for a used car instead of a new one, beyond just the initial cost difference. Why? New cars depreciate 11% as soon as you drive them off the lot, and their value falls 15% to 25% each year for the first five years, according to Edmunds. After five years, your "new" car could be worth a measly 37% of what you paid for it at the dealership. What's more, Edmunds found that after factoring in the cost of ownership, a new car can cost almost $9,000 more after five years than a used car. When money is tight, but you need a pair of wheels, you're better off buying a used automobile.

Potential Savings: $1,800/year based on saving $9,000 over five years when buying a used car

5. Skip Cable TV

There are all kinds of fees that cable companies charge (like activation and escalating basic service costs) that can be avoided by, well, not having cable TV. Using a Roku to stream content from Netflix, Hulu, or elsewhere, or renting movies at Redbox, can offer enough entertainment to make skipping cable worthwhile. You may have to go to your local bar to watch sports though, so factor that in if you're a sports fan.

Potential Savings: $50/month, or $600 annually

6. Save on a Laptop

The computer you got when you started college was probably an excellent deal for its time and has served your needs well. As a graduate, though, you'll likely need a new machine. Selecting a laptop that will perform admirably for the next several years is often a sizable purchase, but there are laptop deals for fully-equipped desktop replacements (those with a Core i7 quad-core CPU, 8GB RAM, and a 750GB hard drive) that continue to hit Black Friday-caliber prices. These offer the best value you can currently get, so if you need a new computer, then aim for a system with those specifications that clocks in at around $800, and snap up anything under $700.

Potential Savings: $550 based on recent deals that hit the aforementioned price points

7. Avoid Over-Priced Hard Drives

Just as you're about to upgrade to a new computer, you'll want to preserve and back up all of those school papers and digital college memories on an external hard drive. Prices have been less than stellar since the Thai floods last fall, but we've seen prices slowly falling once again. At the very least, seeking out a deal online is far better than walking into an electronics store and grabbing a drive off the rack, which will most certainly be overpriced. In the past month, we've seen 500GB drives for as low as $68, a 1TB hard drive for $90, and a 2TB hard drive for $100.

Potential Savings: $20 to $50

8. Set a Budget and Pay Yourself

Every financial planner we talked to suggested that grads set up an emergency fund, create a budget, and pay themselves first. Money Crashers breaks down setting up a budget into 12 steps, the first of which involves setting aside a small amount (about $25 to $50) per paycheck and saving it. Your savings account balance will slowly grow, as you won't have the opportunity to spend it unthinkingly, but the increment is small enough that you may not even notice the difference in each paycheck.

Potential Savings: $300 to $600 annually

9. Start a Retirement Account

Starting a retirement account doesn't seem like an immediate savings because it's money that's coming out of your pocket, but investing in retirement can help save on your taxes. Sena says participating in a 401(k) employer program that matches dollar for dollar, or even 50% of what you contribute, is like giving yourself a raise.

A 401(k) helps lower the taxes you pay now and is best for people in higher tax brackets. On the other hand, a Roth IRA retirement fund helps lower taxes later in life when the money is used in retirement, and is best for people in lower tax brackets, Sena says.

As a recent grad, time is on your side especially when saving for retirement. Someone in their 20s who saves $200 per month for 20 years would have $123,567 by the time they reach age 65. And that's with a conservative net growth rate of 3%, according to Niv Persaud, a certified financial planner. Waiting until age 40 to save the same amount for 20 years yields only $68,416 at retirement.

10. Say Hello to Mom and Dad

Moving home after graduating from college may not be your first choice for accommodations, but it's a good way to save on rent and other bills while getting on your feet and starting to pay off student loans. You won't be the only grad doing it, either. A recent poll found that 85% of graduates are moving back home.

Potential Savings: Upwards of $1,000/month

Total Potential Savings: $6,120 annually if you put away the maximum savings for each instance we suggested. However, this estimate doesn't include the potential savings from moving back home with your parents, which vary wildly and can be great.

Paying off debt is often a slow process, and you should pay back your lender with regular payments to help lessen the overall load. However, with some clever personal financing, you can also squeeze more money from your budget and avoid costly fees that might set you back. And above all, if there are purchases you must make in your life, be sure you shop wisely and save as much as you possibly can by using dealnews.

Front page photo credit: Get Grad Schooled
Photo credits top to bottom: Cleveland, Passionate Homemaking,
IDL Teleservice, I Love to Know Cars, Geek Inspired,
Cash4Laptops, Fearless Gamer, SFist, and Goschiele

Aaron Crowe is a freelance journalist in the San Francisco Bay Area. He has worked as a reporter and an editor for newspapers and websites. Follow him on Twitter — @AaronCrowe.

Follow @dealnewsfeature on Twitter for the latest roundups, price trend info, and stories. You can also sign up for an email alert for all dealnews features.

DealNews may be compensated by companies mentioned in this article. Please note that, although prices sometimes fluctuate or expire unexpectedly, all products and deals mentioned in this feature were available at the lowest total price we could find at the time of publication (unless otherwise specified).


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While obvious ways to save, it's not a bad article as a reminder.
Is this a joke?  10 steps above are not specific to student loans.  I have a better one: 
1.  Don't buy anything.  Put everything you earn into student loan repayment(Potential savings:  income-taxes...).  
2.  Sell everything you own.  Sell your house, sell your car, sell your iPhone.  We're talking about repaying student loans as fast as you can, right?  
3.  Don't enjoy life, eat less, sleep less, work 3 jobs, and don't date!  All of these makes you spend more money or keep you from making more money.  
I totally agree with ethanvyce.  This site is operated by shoppers, not journalists.  Anytime they stray outside of where to find the best price, they fall flat.

That being said, there are a whole bunch of other problems with this story.  First, if you're paying off student loans, you should really ask yourself if you need a new laptop.  If yours is only four years old, and doesn't have other problems, there's a pretty good chance that it will still do most of what you need it to do.  Everyone likes and wants new stuff, but one of the best financial lessons you can learn is how to separate your wants from your needs.

Same goes with more hard drive space.  Anyone visiting this site already knows where to find the best price, because DN finds them for you.  But before you buy it, clean out the old files you don't need anymore.  Uninstall programs you don't need.  Use free cloud space.  Copy things to CDs or DVDs.  Voila, you've just freed up lots of gigabytes for almost nothing.

Saying no to plastic is not the best advice either.  What you need to say no to is carrying a balance from month to month.  A recent graduate needs to build up credit, and learn the responsibility of not charging things they can't afford to pay for when the bill comes.  But many cards offer cash back.  Used wisely, they can actually save some money.  If you find yourself paying any interest, EVER, then yeah, freeze them or cut them up.  But used correctly, they're your friend.  Besides, just try buying something from most DN merchants without one.

Learning to save money right after graduation is an extremely valuable lesson.  There are many great financial blogs that will help, such as Get Rich Slowly, Free Money Finance and Frugal Dad, to name three.  Also, check out a good basic book about investing at your library.  While you're at the library, check out a few DVD's for free, and you can drop your Netflix subscription too.  I could go on and on, but the bottom line is, get out of debt as quickly as you can, and start putting some of your earnings into savings.  Being rich has nothing to do with how much you make.  It has everything to do with how much you save.
dealnews is usually solid, but this is useless. buy a car with cash instead of credit...really? i had no idea. except well if I have a student loan I probably dont have thousands of dollars laying around. actually you SHOULD use credit cards. get the points or cash back or whatever reward. just dont carry a balance. buy a cheaper hard drive..ugh nevermind i quit