Student loans can take up a significant portion of your paycheck, making it difficult to reach your financial goals. It’s worth learning how to pay off student loans fast so you can get ahead of this debt.
Paying off your loan in less time also means less interest overall. In the end, you may have more money to buy a house, a new car, or whatever else you need in life.
If you’re looking for the best way to pay off student loans quickly, here are five tricks that can help, along with some additional tips for getting debt-free:
how to pay off student loans fast
Dealing with student loan debt can be burdensome and stressful. Developing a strategic plan can help you stay on track and get out of debt faster. Here are some steps to consider taking:
Fortunately, there is no penalty for paying more than the minimum or paying off your student loans early. However, student loan servicers will typically apply any excess payments to the next month’s bill – not the principal.
As a result, you’ll need to contact your provider and explain how you’d like the extra payment to be handled. especially, you have to request principal payment onlyWhich ensures that the additional funds go directly to the outstanding amount of your loan.
Most loan officers allow you to make such changes online. Otherwise, you can try calling them directly.
Even if your budget is tight, every dollar helps. For example, let’s say you owe $20,000 on the Standard 10-Year Plan with an interest rate of 4.99%. If you factor in the extra $75 per month, you’ll end up paying off the loan three years earlier and save $1,788 in interest.
experiment with us student loan repayment calculator Just to see what a difference paying extra can make.
|bi-weekly pay benefits|
|another option is to switch to biweekly student loan payments, It splits your monthly bill in half, so you’ll still be paying the same amount as you used to be. However, you will make equal an additional payment each year, You can try this method yourself, or you can supercharge it with additional additional payments.|
If you have a solid income, a credit score in the high 600s and a debt-to-income ratio of less than 50%, you may want to consider a student loan refinance, Refinancing can lower your interest rate, allowing more payments each month to go towards the loan balance.
In addition to hopefully lowering your interest rate, refinancing may also allow you to have a smaller monthly payment if you extend the term of your loan. You also have the option of combining all of your loans (and their individual monthly payments) into a single bill—though you can refinance just one student loan at a time if that works best for your situation.
Keep in mind that the main benefit of refinancing is to secure a low interest rates If you do not find an attractive rate or loan terms, it is best to postpone refinancing. try using our student loan refinance calculator To make sure you are getting a good deal.
|Example: student loan refinance|
|current loan||refinance loan|
|span length||10 years||8 years|
|Rate of interest||7.5%||3.5%|
As you can see in the above example, reducing the interest from 7.5% to 3.5% can save you $5,529 in interest, allowing you to pay off the loan almost two years earlier, while maintaining an even monthly payment.
Student loan refinance rates can drop below 3.00%, making refinancing an excellent option for getting ahead of your debt. For current rates, check our student loan refinance rate,
|Beware of refinancing federal student loans!|
|federal student loan refinance This is generally not advised as you will lose access to some government-funded benefits, such as income-driven repayment plans and student loan forgiveness. However, if you’re not eligible for those programs, refinancing your federal loans may be worth it — but only if you can find a lower interest rate than you’re currently paying.|
In addition to subsidized federal student loans, your loan will accrue interest while you are attending school. (Subsidized loans also accrue interest but the government pays for it while you’re in school). Once you reach repayment, all that interest makes it big Meaning it is added to your student loan balance. In short, you will be paying interest on interest.
By making monthly you can avoid capital interest Interest-only payments while in school and during the six-month grace period following graduation.
and if you stop repayment with delay or tolerance, you can still choose to remit the minimum interest amount and prevent your balance from rising. Alternatively, you can make a one-time payment right before this Your payments resume.
Federal loans automatically come with a standard 10-year repayment plan. Private loans also typically come with a 10-year plan, although some lenders offer repayment plans of 20 to 25 years.
If you can’t afford the extra monthly payments, sticking to the Standard plan is the fastest way to pay off your student loans.
While the federal government provides assistance to those in need, such as income-driven repayment planBe aware that these plans can extend your payback time frame to 20 or 25 years. Furthermore, a student loan consolidation can potentially extend your plan for up to 30 years.
But even so, if you struggle to make your minimum payments, it may be worth your while to change your repayment plan, (Note that you may be unable to change your repayment plan if you have private student loans).
However, if your end goal is to pay off your debt at record speed and you can do If you can afford the monthly payments, the 10-year Standard plan is a solid option.
|Automate your savings with Autopay|
|Many lenders and student loan servicers offer a 0.25-percentage-point rate reduction when you enroll your student loans in autopay, While this discount may not seem like much, it adds up over time. Plus, the “set-and-forget” method ensures that you won’t miss a payment by mistake. Check with your provider to see if they offer an autopay discount.|
Cash windfall can include any windfall or bonus income, such as an inheritance, a lottery win, a settlement from a lawsuit or insurance claim, a work bonus, a hefty tax refund, and more.
if you sudden money gain, you may be tempted to spend it on fun things. However, you can make a serious dent by applying some (or all) of your student loan debt toward your loan balance.
Plan ahead by deciding how much “windfall” cash to devote to student loans. You’ll want to cover the essentials and set aside some emergency funds if you can, but after that, you can put the rest into your student loan account.
Successfully paying off your student loan debt takes a lot of persistence and dedication. And money, of course. Here are some more ideas to explore when considering the best way to pay off student loans.
find a job that offers student loan forgiveness
Some jobs may offer forgiveness for part or all of your student loans. see our public service loan forgiveness And teacher student loan forgiveness guide for more information. Keep in mind that you will need to meet very specific requirements and complete a full term of work in order to receive any type of pardon.
In addition, some Employers offer student loan repayment assistance, Check with your human resources department to see if your company has such a perk.
apply your pick
Hopefully, you work at a job where annual salary increases are part of the compensation. You can use your growth to buy more stuff – a bigger TV, a better car or more exotic vacations. But, as a one-time windfall, why not put a portion of it toward student loan repayment?
focus on your budget
improve your budget If you want more money but cannot grow your income fast enough then this is an option. You can move to a cheaper apartment, give up eating out, buy old clothes, and try other money-saving strategies.
earn extra with side gig
If you are still looking for extra cash, you can try Supplementing Your Income With a Side Gig, Your extra income will not only help you pay off student loans faster, but you can also learn some new skills and have fun along the way.
Be strategic about your debt
When dealing with debt, you have two general approaches to consider: Debt Snowball vs Debt Avalanche, You decide what you want to do…
- …pay off the smallest loan first (snowball), which gives you momentum to continue paying down larger loans
- … Tackle the highest interest loan (avalanche), which saves you more money in the long run.
Whatever the method, try to be intentional about it. With enough focus and commitment, you can hopefully eliminate those debts in no time.