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In the U.S., there are currently 45 million borrowers who owe $1.6 trillion in student loan debt. The average college student graduates owing $32,731 in student loans.
That kind of debt has very serious implications for borrowers who haven’t even entered the workforce yet. Research has shown that student loan debt causes college graduates to delay getting married, having kids, and buying a home.
If you have a lot of student loan debt, it’s easy to feel discouraged, but there are steps you can take to pay it off quickly. Here are 10 hacks to help you pay off your student loans:
1. Make payments while you’re still in school
If you’re still in college, it may be tempting to put off student loan repayment until after you graduate. After all, it’s hard to imagine paying for anything extra when you’re a broke college student.
But one of the smartest things you can do is to start making payments on your student loans now. And this is especially true if a portion of your student loans are unsubsidized.
Unsubsidized federal loans don’t start collecting interest until after you graduate. So if you start making payments on your loans now, those payments will be applied directly to the principal of the loan.
It may feel like paying off your student loans will be easier after graduation, but I promise you that isn’t true. And even paying $25 a month can go a long way toward reducing the balance of your loans.
2. Stick to the standard repayment plan
After you graduate from college, the government automatically puts you on a standard 10-year repayment plan. But many students choose to switch to income-driven repayment plans, which extends the timeline to between 20 to 25 years.
If you’re struggling to make your monthly student loan payments, then an income-driven repayment plan may be the right solution. But if you want to pay back your loans quickly, try to stick with the standard 10-year repayment plan.
It’s going to save you quite a bit of money in interest and is the quickest route to becoming debt-free.
For instance, let’s say you graduate with $32,731 in student loan debt at a 6% interest rate. At the standard 10-year repayment plan, you’ll pay $10,874.74 in interest.
In comparison, if you stretched the repayment term to 20 years, you’ll end up paying $23,547.81 in interest.
3. Make more than the minimum monthly payment
When it comes to credit card debt, most people know that making the minimum monthly payment is a bad idea. But most people are content to pay the minimum on their student loans.
Student loans obviously come with a much lower interest rate than credit cards. But if you only make the minimum payments, you will still end up paying more money in interest and staying in debt longer.
In the standard 10-year repayment plan I outlined above, your minimum monthly payment will be $363.38. But if you bumped your payments up to $392.96, you’ll pay your loans off in nine years and only pay $9,708.70 in interest.
So if you can, try to pay a little bit extra on your student loan payments every month. Paying extra will be the fastest way to pay down the principal.
However, you will need to contact your student loan servicer and let them know that you want these extra payments applied to the loan principal.
4. Set up bi-weekly payments
An easy way to tackle your student loan payments is by making bi-weekly payments instead of just one payment a month. For instance, if you pay $200 a month, try paying $100 every two weeks instead.
If you can stick with this strategy for a full year, you’ll end up making an extra student loan payment. Just make sure you’re careful not to miss any due dates, so you don’t get hit with late fees.
5. Sign up for autopay
An easy way to save money on your student loans is by signing up for autopay. Most lenders offer a .25% discount if you sign up for automatic payments every month. Not only will this lower the amount you have to pay, but you’ll never have to worry about getting stuck with late fees again.
6. Consolidate and refinance your loans
If you only take action on one item from this list, it should be this one. Consolidating and refinancing your student loans is one of the best ways to pay off your loans faster.
When you consolidate your loans, you take multiple student loans and combine them into one monthly payment. Then you refinance them at a lower interest rate. Doing this can save you thousands of dollars over the life of the loan.
Make sure you receive quotes from multiple lenders, so you know you’re getting the best deal. And you do want to be careful if you’re refinancing federal loans with a private lender.
Refinancing with a private lender could save you money, but you will lose access to certain federal benefits like student loan forgiveness programs or loan forbearance.
7. Start a side hustle
One of the biggest challenges recent grads face is that they barely earn enough money to meet their current loan payments, much less pay extra. If you find yourself in this situation, you might consider starting a side hustle.
And there’s never been a better time to start a side hustle. You could become a DoorDash driver, sell some items online, or try to pick up freelancing clients. Make it your goal to earn an extra $500 a month, and apply that money toward your student loans.
8. Throw any extra money toward your loans
Will you receive a tax refund this year? If so, you might consider applying it to your student loans.
Did your grandma send you $50 for your birthday? Send it to your student loan servicer.
I know you want to live your life and putting all of your extra money toward student loan debt probably sounds less than appealing. But these occasional extra payments will go a long way toward helping you pay down your student loans.
And think of it like this: the sooner you can pay back your student loan debt, the sooner you’ll have extra money to spend on other things.
9. Take advantage of tax deductions
Did you know that the government offers a student loan interest deduction on your federal taxes? You’ll need to check to make sure you’re eligible, but most student loan borrowers are.
The current tax law allows eligible borrowers to deduct up to $2,500 in interest payments every year. This deduction can be taken even if you don’t itemize your taxes.
10. Find an employer that will help out
In an effort to attract millennials, many companies are now offering student loan repayment assistance as an employee benefit. Companies that provide this benefit will typically pay out a set amount every month until the lifetime maximum is met.
For instance, Aetna will match student loan payment for up to $2,000 per year, with a lifetime maximum of $10,000. And New York Life will provide $170 per month for up to five years, with a lifetime maximum of $10,200.
Paying off your student loan debt quickly won’t be easy, but it is possible. You may have to take on a side job or make some cuts from your monthly budget to make it happen, but you can get it done before you’re old and grey.
But these temporary sacrifices will pay off in the long run. You’ll end up paying less money in interest, and will become debt-free much faster. And paying off your student loans is one of the best things you can do for your financial future, because less debt means you will have more money to save, spend, and or invest.
Any of the tactics outlined in this article will help you pay off your student loans, but you don’t have to try all of them at once. Even just using one or two of these tips consistently will lead to significant results over the long run.
Contributor’s opinions are their own. Always do your own due diligence before investing.
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