11 ways to quickly pay off student loans
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Nearly Seven out of ten college graduates have government student loan debt, and they borrow an average of $ 30,800, according to the National Center for Education Statistics. Paying back this type of debt can be hard work – especially if you are just getting started in your career.
Fortunately, there are ways to pay off your student loans faster and save money.
Understand all of your debts, then make a plan
Make a list of all of your student loans, including the current balance, interest rate, expected repayment date, and repayment amount for each. Having this information available can help you make more informed financial decisions about the best course of action.
Information on the federal student loan can be found by logging into your account at StudentAid.gov. You’ll need to check your most recent bank statement or log into your online student loan account.
Consider consolidating or refinancing
Decision to consolidate or refinance your or Student Loans can be complicated, especially because these terms are sometimes used interchangeably. But they don’t mean the same thing. Consolidation means combining several federal student loans into one federal direct consolidation loan.
Benefits of Student Loan Consolidation
- Spreading the payments over a longer period of time can reduce your monthly payment amount
- You can switch from variable to fixed rate loans
Cons of Student Loan Consolidation
- A lA longer payment term can result in more interest being paid over the life of the loan
- You can lose borrower benefits associated with ongoing loans such as: B. Interest discounts, repayment discounts or some termination benefits
Refinancing your student loan involves obtaining a new private student loan with new terms and using that loan to pay off one or more existing government or private student loan balances.
Benefits of Refinancing Student Loans
- Simplify multiple loans in a single monthly payment
- May qualify for a lower interest rate with the new loan
Disadvantages of refinancing student loans
- When you refinance federal loans with a private lender, you lose access to income-based or income-based repayment plans, deferral, or deferral
- To lose Federal loan enactment Option for borrowers in certain government, military, education, healthcare, and nonprofit professions
With Credible, you can Compare student loan refinancing rates without affecting your creditworthiness.
Stick to a budget
If you’re struggling to cover living expenses, student loan payments, and the occasional fun, budgeting with the 50/30/20 rule can benefit you. This is how it works:
- 50% of your budget is used for the following requirements: Required expenses such as housing, utilities, insurance, groceries, transportation, and minimum student loan payments
- 30% of your budget is used for the following purposes: Funny things like hobbies, eating out, and other entertainment
- 20% of your budget will be used for savings: Long-term goals like an emergency fund, retirement plans, additional repayments on student loans and investments
The first time you’re creating a budget, look at your bank or credit card statements for the past few months and categorize your transactions into these three categories. The process could open your eyes to some changes that you could make to pay off your student loans faster.
Pay more than the minimum each month
Paying a small surcharge on the principal amount of your loan each month can lower the interest you pay and help you get out of debt faster. The key is to make sure these payments are applied to the principal instead of applying your additional payment to accrued interest. Otherwise, you won’t see much progress on your debt.
Unfortunately, student loan service providers don’t always make it easy to pay off your loans early. To make sure your additional payments are being credited to your principal balance, check your loan service provider’s website to see if you have an option to make additional payments for the principal only. If you don’t see this option on the website, call your lender and ask how you can only make lump-sum payments.
The Consumer Financial Protection Bureau (CFPB) recommends making your request for additional payments in writing and even has one Letter template You can send it to your servicer.
Decide between the debt snowball and the debt avalanche method
If you have several student loansIf you pay a little more for everyone, you will pay off faster. But the debt snowball or debt avalanche methods are more strategic ways to get around get out of debt.
This is how the debt avalanche method works
- Focus on getting your debts off at the highest interest rate and making any additional payments you can afford on this loan while paying the minimum on your other debts.
- Next, move on to the loan with the next highest interest rate and add 100% of the payment you made on the first loan to the second loan.
This is how the debt snowball method works
- Aim for the loan with the smallest balance first and wager any additional principal payments on that loan until it is paid in full.
- Switch to the next lower balance.
While you may pay less interest with the Debt Avalanche Method, the Debt Snowball Method is popular because winning a full loan repayment quickly can help you stay motivated.
Set up automatic payments for an interest rate cut
Federal Student Loans Lender and some private lenders offer a small rate cut when you sign up for automatic payments. With Autopay, your lender will automatically collect payments from your account instead of having to manually make payments every month.
This is a great way to make sure you are never late with a payment, and the interest rate cut – usually 0.25 percentage points – can translate into hundreds of dollars in savings over the life of your loan.
You can easily Compare prequalified student loan refinancing rates through credible.
Get a temporary sideline
When you are just starting your career, it can be difficult to raise extra cash for your student loans. Fortunately, the gig economy offers many ways to make a little extra cash, including:
- Take a ride-sharing service like Uber or Lyft
- Dog walks or pet sitting for busy neighbors with rover or wag
- Find babysitting jobs at Care.com
- Deliver groceries or takeaway orders during your downtime via Instacart, DoorDash, or GrubHub
- When not in use, rent your car through Turo or Getaround
You might also consider selling unused items or flipping items from thrift stores and flea markets on eBay, Facebook Marketplace, or Poshmark.
Use increased income to pay off debt
What did you do with the extra money the last time you received a raise or bonus? If you are like most people, you have used it to improve your lifestyle. Spending more when you are making more is known as lifestyle creep and can prevent you from paying off your student loans quickly.
The next time you get a raise, bonus, tax refund, or other unexpected cash win, don’t spend every penny. Take half (or more) and make an additional repayment on your student loan debt.
Stick to the standard repayment plan
Most federal student loans qualify for the standard repayment schedule, which has fixed payments that ensure that you will pay back your loan within 10 years (or 30 years for consolidation loans).
Of course, the standard amortization schedule isn’t the only way to repay your student loan. But alternative repayment plans such as a tiered repayment plan (which increases payments every two years), an extended payment plan (which gives you 25 years to repay), and an income-oriented repayment plan can all extend the length of time it takes to fully pay off your student loans. And the longer you pay with student loans, the more likely it is that interest costs will increase.
Take advantage of tax breaks
Don’t forget to deduct the interest on your student loan on your federal income tax return. The Tax deduction for student loans allows eligible taxpayers to deduct up to $ 2,500 in student loan interest as a pre-tax deduction, meaning you don’t have to list any deductions to take them.
This deduction will gradually expire if your income is between $ 70,000 and $ 85,000 ($ 140,000 and $ 170,000 if you are married and file a joint statement).
Ask about employer’s student loan repayment programs
Some employers offer assistance to workers with student loan debts, and the number of employers offering such assistance may increase thanks to recent legislation. The Coronavirus Aid, Relief and Economic Security (CARES) Act allows employers to pay up to $ 5,250 per employee for student loans. As a tax-free fringe benefit, these payments are deductible business expenses for the employer, but are not taxable income for employees.
This benefit is available through December 31, 2025.
Check with your employer’s HR department or HR department to see if they currently offer this service. It can significantly affect your efforts to repay your student loan without increasing your taxable income.
Paying back student debts can be an impossible goal when you’re just starting out. But there are many steps you can take to make progress quickly. And this progress will motivate you to keep going. Even small steps can lead to big steps over the course of several years. So try a handful of the tips above to pay off your student loan faster.
Price comparison for Refinancing rates for student loans is easy when you use Credible.