Paying off your student loans faster requires an update in your repayment strategy. Making payments on your student loan debt is never fun, and it’s downright frustrating when you realize those hefty payments could be going to a mortgage, a new car payment, or travel.
Unfortunately, most student loan terms span decades, meaning you could be faced with payments right up until retirement. That’s why getting out from under that debt faster can make a world of difference in your quality of life. But how can you do it? And what strategies should you consider to make those payments more manageable? Here are a few tips to help.
Figure Out Your Payoff Date
First thing’s first: in order to pay off your loans faster, you need to know when your existing payoff date is. How you determine this varies by lender, so check with your loan service provider for more information. In most cases, the payoff date will be listed somewhere on your account. If not, contact customer service and request this information.
Things can get tricky when you have multiple loans with various payoff dates. Using a student loan payoff calculator can help you develop a solid strategy. For instance, you might focus on one loan at a time, doubling up on its payments until it’s paid off. Then you can focus on the next one, and so on. You may also choose to consolidate your loans to get a single payoff date.
Don’t Make Minimum Payments
One of the easiest ways to reduce your student loan debt faster is to make more than the minimum payment. Sticking to the minimum payment won’t make a dent in your loan term, and you’ll continue to pay that minimum payment for 20 years or more.
When making your monthly payment, try to round up the minimum payment by however much you can afford. If this means only paying an extra $10 or $20 per month, you’re still paying the debt down faster than if you were just making minimum payments. To pay the loans off even faster, double up on the minimum payment if you can.
An easy way to pay more than the minimum payment each month is to set up an automatic payment with an extra amount built-in. Start with something small if you have to, and gradually increase that extra amount whenever you can. Once the payments come out of your bank account automatically, it’s easier to feel like you’re getting a handle on your repayment plan.
Consolidate Your Loans
Consolidation takes all your student loans from various providers and refinances them into a single loan. In other words, consolidation is a type of loan that pays off each of your loans with other lenders, creating a new loan with new terms and a new repayment plan.
The great thing about refinancing student debt is that you don’t have to keep up with multiple lenders. Making multiple payments each month can get hectic, especially when different loans have different due dates. It can be hard to keep track of, but with loan consolidation, life becomes much easier.
Another advantage of student loan consolidation is that you can decrease your interest rates. Just be sure to only consolidate loans where you will cut the interest rate rather than raise it. For example, if you already have a student loan below 3 percent interest, you won’t find a refinancing option that can beat it, and you’re better off keeping the lower interest loan and consolidating the rest.
Make a Lump Payment
There are many circumstances during which you might come into a large sum of cash. You could win the lottery, receive an inheritance, or get a large tax refund. When you get any kind of unexpected cash, it’s easy to spend it on niceties like new electronics or a dream vacation, but just imagine how much that money can help you get ahead financially.
Making a lump payment on a student loan can go a long way toward reducing the number of years you’re beholden to those monthly payments. Just think, if you used your tax refund every year to pay a lump amount on your student loans, you could shave years off the debt, which helps save interest in the long run.
Even if you can’t commit to putting your entire cash windfall toward student loans, every little bit helps.
Take a Public Service Job
Certain jobs qualify you to receive student debt forgiveness as long as you complete all the requirements and work in the position for a certain amount of time. Public Service Loan Forgiveness has become a popular program that helps graduates work toward a debt-free future, as is the program for public school teachers.
These forgiveness programs are often used alongside income-based repayment plans to help keep monthly payments low while working in a potentially lower-paying career. One major downside, however, is that if you take a public service job solely for debt forgiveness, you may feel unfilled at work and could be stuck with the debt anyway if you leave the position before the specified amount of time is up.
Avoid Repayment Programs
When the goal is to pay off your student loans fast, stay away from money-saving repayment programs. Income-based repayments and similar programs are essential for many borrowers, but they’re designed to draw out the repayment period to allow for more affordable monthly payments. Since you want to pay off the debt in less time, you need to pay as much as possible each month.
For example, income-based plans such as Pay As You Earn (PAYE) stretch your loan repayment from 10 to 25 years. You will pay less each month, but you’ll be making payments for much longer. When you add interest, you’re also paying more than if you were able to pay off the loan in a single decade.
How you choose to pay off your student debt faster is up to you, but any one of these strategies (or a combination) can help you realize that debt-free dream.