Most students borrow a reasonable amount of money, pay it back, and benefit from having gone to college. However, if a 10, 15 or 20 year term feels daunting, we’ve got tips to get your student loans paid off sooner.
Pay more than the minimum.
As a new college grad, you’re finally earning more than you spend and it’s tempting to upgrade your wardrobe, your vehicle and your apartment. When it comes to the student loan bill, many recent grads opt to just pay the minimum. However, you’ll tackle your loans faster if you can pay extra each month. It takes financial discipline but it’s in your best interest to continue to trim your budget until your loans are paid. Download the FREE Financial Planner to get started.
You also might consider picking up a #SideHustle. Working an additional part-time job for a few years means you’ll be out of debt faster and free to invest in other things. See how this millennial paid their student debt in just 10 months.
Increase your payments.
As your salary grows, your student loan payments should too. Set a goal to increase your payments monthly or annually to pay off your loans faster and pay less interest in the long run. Also apply any bonuses and birthday cash you receive. (Sure it’s not exciting, but as an adult that’s part of being responsible.) Once the accrued unpaid interest is met, any extra payment goes straight toward the principal, meaning you actually pay less over the life of the loan.
As with any loan, it’s critical you make timely payments each month. Late charges can stack up as well as damage your credit. Also, student loans cannot easily be discharged into bankruptcy so it is especially important to borrow responsibly. Set up automatic payments to ensure you’re making payments on time and regularly check your bank account balance; if you have multiple automatic withdrawals, it can be easy to overdraft your account without realizing it. Don’t forget to let your lender know when your contact information changes so they can get in touch with you if there’s a problem.
Be strategic about the interest.
Prioritize paying off your higher-interest loans first; experts call this a debt avalanche. By doing so, you’ll pay less in interest overall and finish paying your loans off sooner. Also check to see if you are eligible for student loan interest deductions on your federal income taxes. You may be eligible to write off as much as $2500 each year on student loan interest. Lastly, if you have more than one, you should consider consolidating your student debt. Both private and federal student loans are eligible and you may be able to qualify for a lower interest rate, as well as switch to one easy monthly payment.