9 Ways To Pay Off Your Student Loan Faster
Paying off your student loans doesn't have to be a daunting task. With the right strategies, you can tackle your student loan debt in no time.
Table of Contents
- 9 Ways To Pay Off Your Student Loan Faster
- Final Thoughts
For most students, taking out student loans is often a necessity in order to finance higher education, but it can be daunting to face the repayment process that comes with it. Fortunately, there are a number of ways to pay off your student loan faster, thus reducing the burden of having to make large payments each month. By understanding the different strategies, you can save a significant amount of money in interest and get out of debt sooner rather than later. Here are nine ways to help get you started on the road to clearing your student loans.
9 Ways To Pay Off Your Student Loan Faster
Take your pick from any one of the following nine ways to help you manage your student loan.
#1 Calculate Your Debt
When deciding how best to pay off your student loans, it’s important to thoroughly evaluate your financial situation, as this will help you decide which methods work best for you. In this way, you ensure that you’re able to make the most of any available repayment options.
Gather all student loan information
Before attempting to pay off your student loans, it’s important to make sure you have all the information regarding your loans. This includes the interest rate, monthly payment amount, and total loan amount. Having this information will help you create a plan for how to approach your repayment strategy.
Determine interest rates
Knowing the interest rates of your loans is critical, as it can help you decide which ones to pay off first. Generally, loans with higher interest rates should be prioritized in order to save more money in the long run.
Identify monthly payments
It’s important to know how much you need to pay each month in order to pay off your loans as quickly as possible. Knowing the exact amount can help you budget accordingly so that you’re not struggling to make payments each month.
Understand total amount owed
Make sure that you understand how much money you need to pay off overall in order to become debt-free. This can help you determine how much money you need to save each month in order to pay off your loans as quickly as possible.
#2 Create a Budget
Creating a budget is an essential step to successfully paying off your student loan debt. Here are some ways to make the most out of this method.
Determine monthly income
Knowing how much money you bring in each month is a key part of budgeting. Calculate your total net income (after taxes) so that you have a more accurate idea of what you can expect to spend or save each month.
Separate your necessary spending from leisure expenses. In this way, you can determine which expenses to cut down on or eliminate. Necessary spending typically includes living expenses such as housing, food, and transportation costs. In contrast, leisure purchases tend to fluctuate based on your own discretion such as entertainment or dining out.
Allocate funds for loan payments
Finally, decide how much of your income should go towards paying off your student loan debt each month. Having a designated budget category for your student loan payments will help you stay on track with repayment goals and ensure that all of the money allocated towards your loan is used properly.
#3 Choose a Repayment Plan
Choosing the right repayment plan can help you pay off your student loans faster by reducing both payments and interest costs. Consider any one of the following.
Standard Repayment Plan
This plan is the default repayment option for student loans. It has fixed monthly payments that are spread out over a 10-year period and will be applied to both principal and interest. The minimum monthly payment for this plan is typically around $50. It’s important to note that you may be able to pay off your loan faster than 10 years if you choose, which will result in a lower total balance and interest costs.
Graduated Repayment Plan
The graduated plan allows borrowers to make smaller payments at the beginning of the repayment period and then gradually increase payments over time. Payments are spread out over 12 years, but borrowers may pay off their loans faster by making larger payments when they have the means or by taking advantage of any extra payment options available with your lender.
Income-Based Repayment Plan (IBR)
IBR is a plan based on a borrower’s yearly income and family size. Payments are adjusted on an annual basis, meaning that the minimum monthly payment can be lowered if a borrower experiences a decrease in income or an increase in family size. This plan is a good option for borrowers who may not have steady incomes but want some stability in their payments.
Income-Contingent Repayment Plan
This plan is based on a borrower’s income, family size, and total loan amount. Payments are adjusted annually and borrowers can have their loans forgiven after 25 years of payments. This option is good for borrowers who may not have the income stability to qualify for other repayment plans.
Pay-As-You-Earn Repayment Plan (PAYE)
This plan is fairly similar to IBR, the main difference is that the monthly payments are based on a percentage of discretionary income such as wages, salaries, or other earnings. PAYE can be beneficial for those who either have a low income or may not make enough money to qualify for IBR.
Revised Pay-As-You-Earn Repayment Plan (REPAYE)
Just like the name suggests, this plan is a revised version of the PAYE, so the adjustment lies in the fact that the monthly payments are based on a percentage of discretionary income such as wages, salaries, or other earnings. REPAYE has a 10-year repayment period and offers a lower monthly payment amount than the standard plan.
#4 Make Extra Payments
Making extra payments is a great way to help pay off student loans at a quicker rate due to the benefits that come with it. Here’s how to get started:
Allocate extra funds towards loan payments
Set aside extra funds each month and direct them toward your loan, in addition to the minimum monthly payment that you’re already paying. Allocating these extra funds can help reduce the total amount of interest paid on a loan and shorten the repayment period, allowing you to pay off your student loan faster.
Utilize tax refunds or bonuses
Taking advantage of tax refunds or bonuses can be a great help in cutting down your student loan balance. This money can be used to make extra payments on the loan, helping you get closer to paying off your debt faster.
#5 Refinance or Consolidate
It’s important to understand the difference between refinancing and consolidating your student loans when trying to pay them off faster. Refinancing is a great option for borrowers with a good credit score who want to lower their interest rate, while consolidation may be more beneficial for those who need a longer repayment period or multiple loan providers. Depending on the route you choose, here are some aspects to keep in mind.
Research different lenders
There are a number of lenders that offer refinancing and consolidation options, so make sure that you compare interest rates, fees, repayment terms, and other services offered by each lender in order to find the best deal to help you pay your student loans.
Following are some of the best companies for refinancing your loans.
|Lender||Scholaroo||Our view||Fixed rates||Variable rates||Learn more|
|Best for Low Interest Rates with Discounts||4.99%||4.74%||Visit website|
|Best for Flexible Repayment Options||5.99%||5.99%||Visit website|
|Best for Refinancing Parent Plus Loans||4.99%||5.99%||Visit website|
|Best for Refinancing without Cosigner||4.96%||5.32%||Visit website|
|Best for Mid-Income Earners||4.49%||5.02%||Visit website|
ISL Education Lending
|Best for In-School Refinancing||6.50%||N/A||Visit website|
Determine eligibility for refinancing
Evaluate your credit score and overall financial situation when considering refinancing and consolidation. Depending on the lender you choose, there may be specific requirements that must be met in order to qualify for a loan. Additionally, it’s important to know if you’re eligible for any special programs, such as income-driven repayment plans or loan forgiveness.
#6 Seek Assistance
Seeking professional advice is invaluable when it comes to paying off student loans. If you’re not quite sure where to start, here are a few guidelines.
Contact loan servicer
Reach out to your loan servicer and ask about repayment options, interest rates, or any other information that could help you pay off your student loans. They can also provide advice on how to structure a payment plan that works for you, as well as inform you of any special programs or incentives they may offer.
Inquire about repayment options
Understand what repayment options are available to you, such as income-driven plans or graduated payment plans that may be more affordable and help you pay off your student loans faster.
Explore loan forgiveness programs
Look into any loan forgiveness programs offered by the government or your loan servicer. Any one of them can provide an opportunity to reduce your student loan debt and save you money in the long run.
Seek guidance from a financial advisor
Financial advisors are also a key resource when it comes to understanding your options and creating a plan to pay off student loans quickly. They are able to provide you with personalized advice. helping you to take advantage of any special programs or incentives you may not otherwise have been aware of.
#7 Increase Income
Finding ways to boost your income will no doubt help you make larger payments towards your debt, ultimately leading to quicker repayment and less interest paid over time. Take your pick at any one of the following ways to achieve this.
Seek a higher-paying job
Take some time to look into higher-paying jobs or career paths you may be interested in. Alternatively, speak to your employer about possible opportunities for promotions or raises at your current workplace.
Consider a side hustle
Look into ways to supplement your income with additional sources, such as starting your own side business or taking on freelance gigs.
Freelancing or consulting
It may also be worth exploring freelancing or consulting opportunities, as these can provide a great source of extra income to help you pay off your student loans faster.
#8 Reduce Expenses
Decreasing your expenses is an effective way to quickly pay off student loans. By making small changes, you can save money and put extra cash towards your debt each month.
Cut back on entertainment costs
By reducing the amount you spend on recreational activities, such as shopping, going to the movies, or streaming services, you can free up more money to put towards your student loans.
Reduce grocery bills
Look into ways to save money on groceries, such as using coupons, buying in bulk, and preparing meals at home instead of eating out.
Minimize dining-out expenses
Instead of dining out, consider alternatives such as packing your lunch or having dinner parties with friends. Doing this can help you save money to settle your student loan debt at a faster pace.
#9 Automate Your Payments
Automating your student loan payments is an easy way to stay on top of your debt and pay it off faster. By setting up automatic payments, you’re ensuring that you’re making consistent payments each month, allowing you to save money in the long run by avoiding missed or late payments.
Prioritize loans with higher interest rates
Prioritizing student loans with higher interest rates when setting up automated payments can save you money in the long run. By targeting these loans first, you’ll be able to pay them off faster, as more of your payment will go towards paying down the principal balance rather than interest. Additionally, tackling higher-interest debt will help reduce the amount of interest you’ll pay overall.
Here are some frequently asked questions.
At what age do most pay off student loans?
Most people pay off their student loans by the time they are in their mid-30s.
Why is it hard to pay off student loans?
It can be hard to pay off student loans due to the high-interest rates and longer repayment periods that are associated with them.
Is student loan worth the debt?
Student loan debt can offer a valuable investment, allowing you to access higher education which can open up opportunities for a successful career, higher wages and more fulfilling job satisfaction. However, it is important to assess the cost vs benefit of taking out student loans before making the decision to do so.
Taking the decision to find a way of paying off your student loans at a quicker rate is, ultimately, a great way to save money in the long run, as doing so reduces the amount of interest that accumulates over time. Furthermore, it can provide peace of mind knowing that your debt is taken care of and you’re able to make strides towards achieving financial independence. These nine ways are simply a guide to help you develop an effective repayment plan and start feeling relief from your debt sooner.