If you are far away from paying off your student loans, then hold on a minute. You can definitely take steps to pay off your student loans. In this article, I’m going to show you how to get student loans paid off with some simple strategies.
Whether you’re graduating soon or trying to pay off student loans for years, you can make a plan for paying off student loans quickly.
Let’s set some expectations. There is no “magic plan” for paying off student loans. There is no special trick to share or process to get rid of it all in 30 days. It won’t happen overnight. Sorry, guys.
But if you take these measures, you will get on the fast track of eliminating your student loan debt for good. It takes time, hard work, and a lot of sacrifice to pay off your student loans, but it’s completely feasible! Let’s just make it happen.
In this Article:
When You Have Good Credit and a Stable Career, Refinance
Refinancing student loans is a smart way to pay off student loans quickly without incurring any additional charges.
Refinancing replaces multiple student loans, preferably at a lower interest rate, with a single private loan. To speed up repayment, pick a new term that’s less than what you owe.
Your monthly payment can be increased by opting for a shorter term. But it’ll help you pay off your loans more easily, and save money in the process.
Refinancing $50,000 from 8.5 percent interest to 4.5 percent, for instance, will allow you to pay off your student loan debt almost two years quicker. It will also save you an interest rate of about $13,000, even with payments that remain around the same.
If you’ve had a credit score in at least the high 600s, a solid salary and a debt-to-income ratio below 50%, you’re a strong candidate for refinancing. If you want or need services like revenue-driven repayment or Public Service Loan Forgiveness, you can not refinance federal student loans.
Make Payments Biweekly
This simple solution is a way to trick yourself into spending more on debt: instead of making one full monthly payment, pay half of your payment per two weeks.
Per year, you will end up making an additional payment, shaving time from your repayment timeline and dollars off your interest expenses. To see how much time and money you can save, use a biweekly student loan payment calculator that you can find anywhere online.
Make Additional Payments the Correct Way
There is never a penalty for early payment of student loans or paying more than just the minimum. But there is a pre-payment caveat: student loan servicers collecting your bill may add the extra payment to the next month’s payment.
That pushes your due date forward, but it won’t help you pay off student loans more quickly. Instead, advise your servicer to add overpayments to your present balance, either online, by phone or by mail, and to hold the due date of next month as scheduled.
At some point in the month, you can make an extra payment or you can provide a lump-sum student loan payment mostly on due date. Any of these could save you a lot of money.
For example, with a 4.5 percent interest rate, let’s assume you owe $10,000. You will be debt-free upwards of five years ahead of time by spending an additional $100 per month, if you were on a 10-year repayment plan.
Making Some Compromises In Financial Terms
Check out your lifestyle. What extra stuff did you deal with that you could do without? Bye, box of cable. See you, delivery boxes for candles. Maybe by having a roommate, you will cut your housing costs in half. Do you have a guest room that isn’t used a lot these days? Rent out that sucker! Only think about how easily you can pay off your debt if your cost of living has been reduced.
How about selling some garbage that you no longer need? To see what you can place on eBay or Craigslist, search through your wardrobe, garage and storage. Then, sum up what you spend each week on dining out. Ditch the espressos and brew at home your own coffee. Instead of wasting $10-20 on lunch, have leftovers (they are not that bad) or meal planning for the week. Trust me, there are many innovative ways of saving.
Enrolling In Autopay
If you may not want to refinance your loans, another possible way to lower the interest rate on your student loan is to sign up for autopay.
When you let them automatically subtract fees from your bank account, federal student loan servicers give a quarter-point interest rate discount. Many private lenders are now providing an auto-pay deduction.
The savings from this discount are likely to be modest. Based on a 10-year repayment plan, lowering the interest rate of a $10,000 loan from 4.5 percent to 4.25 percent will save you around $144 overall. But that’s also extra cash to help quickly pay off student loans.
Please contact your servicer to register or find out if any autopay discount is eligible.
Start a College Repayment Fund
Another great way to rapidly paying off student loans is to bring your money into an account that you can’t immediately draw from with a card swipe. It is productive to get capital transferred into savings automatically because it’s forced. It helps individuals to set aside money to build what would otherwise be spent on clothing or eating out.
Just make sure to set up an account that can only be used to pay your college debt back. Don’t use checking or savings accounts you already have, because for something other than your student loan, you could use that money. To increase your investments, compare savings accounts and place your money in an account with a higher yield.
Final Thoughts
It will certainly be worth it to pay off your student loans early, but only if you are financially prepared.
You’ll want to keep your finances in order and have a financial plan in place to prevent putting yourself in a less-than-desirable financial position. Take a look at your budget before you start paying off your student loans to make sure you can handle additional payments without ending up with more debt. It is not prudent to pay back more than the monthly minimum on your student loans if it causes you to miss credit card or mortgage payments.
If you are dealing with other types of debt, especially high-interest debt, it may also not be worth it. For example, if you have a credit card balance with an interest rate of 16 percent, it makes more sense to put additional payments into that account rather than into a student loan of 5 percent interest.