If it seems that paying off your student loans will take forever, or worse, totally impossible, pause, and hold on just a minute. Yes. Getting rid of your student debt can be overwhelming. But believe it or not, it does not have to be.
It does not matter whether you are graduating from college soon or you have been tackling the student debt for years. You can still develop a plan to get rid of your student loans faster.
But before we begin, let’s make some points clear. There is no quick scheme or magic plan to pay off your student loans. We do not have any unique trick under our sleeves to help you get out of debt in 30 days flat. You will get out of debt, but it will not happen overnight. Sorry, guys.
However, if you follow these steps, you can quickly pay off your student loan debts once and for all. Remember: Getting rid of your student loans takes hard work, time, and lots of sacrifices, but it is entirely doable!
Alright then, let’s begin.
Make Payments While In School
You do not need to pay the principal on your student loans if you are still schooling. However, nothing stops you from starting to pay off your student debts while in school. Suppose you make any payments while schooling; it will go toward your loan principal. And that will decrease the overall amount you owe.
When you keep up with this, you will have less interest to pay on your student loans in the future. So you should consider a part-time job. That will help you make early payments. If you already have part-time work, you can increase your student loan payment when you get a raise. It is an effective way to pay off the debt, and you will be glad you did so.
Pay More Than The Minimum Payment
You may have heard this statement before. It is reasonable to say that only making minimum payments every month will not help you pay off your debts faster. You may be piling up your interest with no payments to break it even!
If you make higher payments, you can tackle the amount you owe faster. You can use a student loan payoff calculator. That will help you find out how quickly you can get rid of your student loans when you make extra payments.
Let’s take an example.
Let’s take the typical average student loan debt that a U.S. citizen carries, $35,000. (The figure could include several loans, but let’s say it is all a single loan just for this example.) The standard interest rates are between 4.53-7.08%, so let’s choose a six percent interest rate.
With a 10-year loan term (which is also a standard), you would be making a minimum payment of $389 each month. The overall repayment amount would get to $46,629 due to the interest rate. That is $11,629 above your original loan!
If you decide to pay 20% more than the minimum payment every month (that is $77), your monthly payment would be about $466. That means you can pay off your debt in nearly eight years. You also get to save more than $2,600 in interest rate. The more you increase, the faster you get out of debt.
Do you get the picture now?
However, keep in mind that when you pay more than the required minimum, the loan services will add the extra money onto next month’s payment. That will push back the due date, but you will not pay off your student loan debt faster.
You can prompt your loan servicer to maintain the due date for next month and add the extra amount to your current loan balance.
Avoid Some Repayment Plans
The federal government repayment programs such as income-based repayment programs can help if you struggle with loan repayments. That is because the program can help you stay out of federal loan default.
However, if you want to pay off your debts faster with the budget, repayment programs may not be the best choice. Most repayment programs help you make lower payments each month. They do this by increasing your loan term. So it takes you longer to get out of debt, but you may pay more interest rates in the long run, especially if you are not eligible for loan forgiveness.
So if you want to pay off your student loan debts faster, you should avoid any repayment plans that lengthen your payment terms.
You can also apply for student loan forgiveness through various programs.
It is relatively simple to talk about a hundred ways to clear your student loan faster. The hard part is taking the actual step to do it. When you decide which loan payoff plan works for you, develop a plan, and that plan should include regular check-ups to keep you on track.
You will need to make some sacrifices to pay off your debts faster. But the result is financial freedom and the ability to take control of your finances, and ultimately your future.
If you stick with these three steps, you will positively change your student loan debts. All the best!