Fun Money: How Much to Allocate When You Have Student Loans

By Melissa Brock · March 19, 2024 · 10 minute read

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Fun Money: How Much to Allocate When You Have Student Loans

In some popular budgets, 30% of your take-home pay goes toward the wants in life. So if you are wondering how to enjoy life when you have student loans, some of those funds can go to dining out, travel, and more. While student loans can eat up a portion of your disposable income, with smart budgeting, you can have some fun money available as you make your payments.

Read on for advice on how much money to earmark for fun when you’re focused on paying off what you borrowed for your education. Student debt, after all, is a phase of your life that you are moving through, and you can indeed find ways to live life while paying off student loans..

The Impact of Student Loan Debt

Yes, student loans can require time and effort to pay off. Many Americans are working their way through their payments. In fact, in one recent survey, the College Board found that 54% of undergraduate students at four-year institutions graduated with student loan debt. In other words, you are not alone.

Having that debt hanging over you can have an emotional impact in addition to affecting your finances. Student loan debt can result in higher levels of mental health issues; it can possibly contribute to money stress or feelings of depression.

That in turn can put strain on other aspects of life. It might, for instance, lead a borrower to delay life decisions, such as getting married or starting a family.

But having student loans on your plate can have a silver lining. That debt can encourage you to build positive financial habits as you work through your payments. You can learn how to budget efficiently. You can learn resilience and how to work through paying off debt. Consider it good practice for when you might have a car loan or a mortgage in the future.


💡 Quick Tip: Get flexible terms and competitive rates when you refinance your student loan with SoFi.

How Much Money to Allocate for Fun

As you look at your budget when paying off student loans, you might wonder, “What’s the right amount of money to allocate for fun?”

There’s no “right” or “correct” amount. Funds that you allocate toward fun (whether that means buying new clothes you don’t need, snapping up some concert tickets, or spending a long weekend at the beach) will need to work within your budget. Given that you are allocating a percentage of income toward student loans, here’s how to figure that out.

10% Rule

The 10% Rule refers to allocating 10% of your monthly income after taxes toward fun. For example, if you make $3,000 per month after taxes, you’d allocate $300 toward fun each month. You can use that amount guilt-free, whether you want to put it toward hobbies or dining out.

50/30/20 Rule

The 50/30/20 rule could also help you budget when you’re paying off student loans. Here’s how it works; you would allocate your take-home pay as follows:

•   50% essential expenses: Essential expenses refer to the cost of housing, food (groceries, not going out to brunch with friends), healthcare, and the like, as well as minimum debt payments, such as what you owe per month for your student loans, credit card, and car loan, if you have one.

•   30% discretionary expenses: Discretionary expenses include items that aren’t as essential, including dining out (like the above-mentioned brunch), personal care (spa days, training sessions), non-essential clothes, travel expenses, etc.

•   20% for savings and additional debt payments: You can think of these as putting money toward your short- and long-term goals. They can include savings, investments, or a child’s education. Or making additional payments toward you student debt to pay it off that much faster.

70/20/10 Rule

Another type of rule, the 70/20/10 rule, may seem just like the 50/30/20 rule, which it is — just with different allocation percentages. This rule means you divide your take-home pay as follows:

•   70% goes toward needs and wants.

•   20% goes toward debt repayment and short-term savings.

•   10% goes toward investing and donations.

You would figure out how much of that 70% you can allocate for fun to make this budget work for you.

Budgeting as a Couple

If you have a partner, you will have to decide how to budget your funds. Some couples keep their money separate, while others pool their resources. You may be in a situation where one person earns more than the other, or perhaps one is still in school. One or both of you may have student debt in a marriage. It can take some discussion and experimentation with different budget systems to decide how to divide your money up to cover:

•   Essential expenses

•   Discretionary expenses

•   Goals

•   Debt payoff

•   Savings (whether for the down payment on a house, an emergency fund, or other goal).



💡 Quick Tip: It might be beneficial to look for a refinancing lender that offers extras. SoFi members, for instance, can qualify for rate discounts and have access to career services, financial advisors, networking events, and more — at no extra cost.

Choose Your Fun

Fun money should be intentional and focused. There’s no rule on how to live life while paying off student loans, so consider what would bring you joy. Would it be knowing you can go out to dinner once or twice a month? Being able to buy a new mountain bike? Becoming a member at your favorite local museum?

A quick reminder: Not that there’s anything wrong with saving for a crazy weekend in Vegas, but you don’t need to spend thousands to have fun. Don’t forget to also find low-cost fun with family and friends through free local concerts, movie nights at home, strolls through the local farmers’ market or sunset walks at a local park, potluck dinners, and similar activities. Making your own fun can be a free or cheap way to stretch your budget while paying off your student loans.

Monthly Budget Example

Here’s a quick example of a simple monthly budget. Say your take-home pay is $6,000 a month , and these are some basic expenses:

•   Mortgage: $2,000

•   Property taxes: $500

•   Credit card debt: $500

•   Food: $300

•   Car loan: $300

•   Student loans: $250

•   Transportation (gas, etc.): $100

•   Utilities: $260

•   Healthcare: $300

•   Retirement savings: $200

•   Emergency fund savings: $200

•   College savings for your child: $200

•   After-school childcare: $500

Total expenses: $5,610

If you have allocated the amounts needed in the 50/30/20 budget rule, for example, then you would subtract $5,510 from $6,000, and you have $490 left. In that case, you may consider using the difference between your expenses and your income as your fun money, as long as you’ve covered all your bases with your expenses.

Set Goals for Life Beyond Debt

Imagine your future without student loans. Setting financial goals — such as paying off student loans or other debt or accruing enough cash for the down payment on a house — can help you build long-term financial stability and help you work toward financial freedom. The best way to do that is to plan to achieve these goals and stay committed to them.

Take a look at this example: Let’s say that instead of buying a new pair of shoes every month, you put $100 in an investment account every month. In five years, that amount could grow to $8,000, and over 30 years, it could grow to over $280,000.

Without dipping into a no-fun lifestyle or dealing with more money stress, consider finding a way to economize today to make tomorrow brighter. For example, maybe you could forgo or cut your fun money for a few months out of the year to build your savings. Or put the money saved toward crushing your student debt that much sooner.

Recommended: Ways to Stay Motivated When Paying Down Debt

How to Manage Student Loans

What’s the best way to manage student loans without forgetting to allocate money toward fun? Take a look at a few steps you can take.

Make It Automatic

First, consider setting up an automatic payment plan through your loan servicer. An automatic payment plan will automatically pull money from your account each month, ensuring you do not miss any payments.

Missing payments can result in a delinquent account, which happens the first day after you miss a student loan payment. If you remain delinquent on your student loan payments after 90 days, your loan servicer will report you to the three major national credit bureaus. This could lower your credit score, which might make it more difficult to obtain credit, get a job, or secure housing.

If that carries on, you could default on your student loan. Consequences could include the entire unpaid balance of your loan coming due, loss of eligibility for federal student aid, further damage to your credit score, wage garnishment, and possibly legal action against you.

This is an extreme situation, but making it automatic will prevent these issues from occurring.

Income-Driven Repayment

If you’re a federal student loan borrower, you may qualify for an income-driven repayment plan, which means monthly student loan payments get capped at a certain level of your income and family size.

Several types of income-driven repayment plans include the Saving on a Valuable Education (SAVE) Plan, Pay As You Earn (PAYE) Repayment plan, Income-Based Repayment (IBR) plan, and the Income-Contingent Repayment (ICR) plan:

•   SAVE Plan: Caps your payments at 10% of your discretionary income and, as of summer 2024, possibly 5%.

•   PAYE Plan: Caps your payments at 10% of your discretionary income, and you’ll never pay more than the 10-year Standard Repayment Plan amount.

•   IBR plan: Caps your payment at 10% of your discretionary income if you’re a new borrower on or after July 1, 2024. If you’re not a new borrower on or after July 1, 2014, your payment generally caps at 15% of your discretionary income.

•   ICR plan: Offers the lesser of 20% of your discretionary income or what you would pay on a repayment plan with a fixed payment over 12 years based on your income.

You must apply to qualify for one of these plans (contact your loan servicer) and update your income and qualifications every year to continue with one of these plans.

Prioritize an Emergency Fund and Retirement

Many graduates ask this question: Should I fund my retirement and emergency savings or pay off my student loans?

In most situations, there’s no reason why you can’t do both. Furthermore, it’s important to realize the importance of funding an emergency fund and retirement savings.

•   Your emergency fund is a financial safety net that will allow you to pay for a critical home repair (think air conditioning in the summer!) or help cover the negative financial consequences of becoming unemployed. Ideally, you want to save three to six months’ worth of basic living expenses in an account where you can quickly get the money out if necessary.

•   Saving for retirement when you have student loans can be an important step for your financial security as you reach older age. If you retire at 65 and live till 95, you must ensure you’ve saved enough to last those 30 years. Consider contributing at least enough to your retirement plan to get your employer match — many employers match between 3% and 5% of employee pay.

Putting money in all these “buckets” means prioritizing and organizing your debts, putting together a budget, tracking your spending, and setting savings goals.

Celebrate Your Progress

Don’t forget to take time to celebrate your progress! In addition to spending your “fun money,” you should also allocate time toward celebrating your student loan payoff goals.

For example, if you choose to pay off a high-interest rate loan and succeed in paying it off, consider rewarding yourself with a night out or another type of splurge — maybe a larger splurge than you would ordinarily allocate for fun money.

Recommended: How to Handle Student Loans During Job Loss

The Takeaway

While student loans and other debt types may make you feel burdened, remember that this is just a phase you are moving through. Building fun money into your budget can help bridge the gap between frustration and feeling like you have flexibility.

Write down a few things you enjoy doing, and budget for them. Also investigate other ways to free up funds to make paying off your student loans more manageable.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.


With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.


Photo credit: iStock/Dragon Claws

SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.


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Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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