The price of college tuition continues to rise every year, which is leaving many graduates with thousands of dollars in student loan debt. The average cost of a 4-year degree has skyrocketed to over $23,000 for an out-of-state college. The average student in 2015 was graduating with around $35,000 in student debt, the highest amount in history. For many students, the idea of paying off these debts can be overwhelming, especially when many graduates do not have a job lined up as they walk across the graduation stage.
10 Ways to Pay off Student Loans Faster
Most student loans have repayment time periods of 10 to 30 years, but that doesn’t mean you have to be stuck making payments for the majority of your life.You can pay them off your loans in a much shorter time. Using a couple of these tips and tricks, you can see your loans shrinking in no time.Don’t worry, none of these ways include selling any vital organs or a first born child.
Trim your budget
Looking at your budget and cutting back on expenses can give you a little more money to spend towards your student loans. Common expenses like eating out for dinner, getting coffee every morning, or extra money spent on clothes can be cut down and put towards looming student loans.
Spend a whole month tracking all of your spending and look at where your money is going. Use can use spending apps that link to your bank account, or you can track your spending manually with a piece of paper.
Refinance the loans
Refinancing your loans can make a huge difference in paying off your student loans. For many students, refinancing loans can help give a significant leg up on paying them off early.
Many students have several loans, all of which have different interest rates. Refinancing your student loans can give you one single loan with a lower interest rate saving you money in the long run. Aside from lowering your interest rates, refinancing can also prevent you from variable interest rate increases you could see in the future.
Pay more than the minimum
More than likely a recent college graduate will not be making a six-figure salary, some graduates even struggle to cover all their bills, but even finding $25 to pay over the minimum will make a huge difference in paying off those student loans early. Any money that is paid over the minimum monthly payment goes directly towards the principle of the loan.
Find a loan forgiveness program
Depending on your degree, you could be eligible for a federal loan forgiveness program. Some public services positions like teaching offer programs that will essentially erase your debt.
To be eligible for the Public Service Student Loan Forgiveness program, you must work in a public service position at a nonprofit or a government job. After finding an acceptable job, you’ll have to continue to pay loan payments for the next ten years before your debts will be forgiven. The loan forgiveness program does not accept every repayment plan, plans that qualify include:
- Standard repayment
- Income-Contingent Repayment
- Income-based Repayment
- Pay As You Earn
- And several others
The loans that are eligible for the forgiveness program are all federal direct loans. Employees are allowed to receive a maximum of $10,000 in one year for their student loans, and receive no more than $60,000 by one person.
Put the Christmas money towards loans
It’s tempting to splurge and buy something that you’ve wanted for a long time, but when you get money from Christmas bonuses, as a birthday present, etc. it’s important that you designate that money for student loans and not a new pair of shoes or a shiny new gadget. Paying large chunks of money like a Christmas bonus will make a significant difference in paying off your student loans, it will also create a “cushion” if you need to pay less one month because of a financial emergency.
Pay off highest interest loans
Many financial experts call this technique the “Debt Avalanche Method” for paying off loans. By paying off your highest interest rates loans first, you’ll save yourself money from paying all the extra interest over the course of the loan. While this means that you will be paying on smaller loans for a longer time, it will save you money on the interest that would be accumulating otherwise.
Auto-enroll your payments
Putting your student loans on “auto pay” has two different benefits. Not only will you never forget to make a payment, but some lenders even include a minor discount on interest rate if you enroll in their auto payment program. According to Finaid.org, discounts for auto-pay can be anywhere from .25% to 2.5% (which is less common). Setting your loans up for auto-payment is easy, either visit your loan company’s website or call a representative.
For many graduations participating in an Income Based Repayment plan is one of the most profitable routes to managing your student loans and paying them off quickly. The Income Based Repayment plans does exactly what it sounds like, your monthly payments will be adjusted to your discretionary income. The monthly payments in these programs will not be higher than 10% of your discretionary income, which allows you to toss extra money at the loans when you can afford to. If you ever have a change in salary, either a raise or a pay cut, you can reapply for the income-based repayment with your new salary amount.
Understand your loans
The majority of recent graduates do not know their interest rates, minimum monthly payments, or the estimated date they should have it paid off. Understanding which loans have higher insurance rates and how long they will take to pay off is essential in paying them off quickly. Knowing your payoff date is important when trying to pay off the loans early.
Find a part-time job
This is not the most popular idea, especially for someone that is already working a full-time job, but it can be the most effective. If your full-time job pays all of your bills, then all the money earned from a part-time job can go directly towards student loans.
The part-time job can be anything from freelance work to making crafts and selling them, anything that will generate extra money that will not affect your full-time job. There are hundreds of free-lance and work-from-home jobs that are available. You can find dozens of jobs on Craigslist.com or similar websites.
Paying off student debts quickly
Anyone that has student loans feels like it may never end, but don’t be discouraged, with a little determination and hard work, you can knock those loans out in no time. With a few of these tips and some extra Christmas money, you’ll be debt free before you know it.