Completing an education program such as a degree or post-graduate course requires a lot of funding. Most people feel relief when they pay off their student loans fast. The cost could be a burden on students that have no one to sponsor them. Governments and various financial institutions have different loans designed to cater to students’ needs during their academic years to address this issue. However, many students who opted for various student loans find it challenging to pay back after their school year, especially when faced with paying their bills, saving for a house, and starting a family.
If you are one of the students having this problem and are feeling overwhelmed, there are quick ways to pay off your student loans so that you can focus on other essentials of life.
Below are tested and proven strategies that will help you quickly paying off student loans and if you are looking for a tool that could help you crush your student debt, check out the FutureFuel.io student debt toolbox as well.
How To Pay Off Student Loans Fast
If you are trying to pay off your student loans more quickly, avoid repayment programs that extend your payment terms. Make the minimum monthly payments on student loans and then focus on paying back the interest. Always pay your minimum monthly payment and work to invest the extra income you have in a smaller balance for your students. The longer it takes to pay off student debt at a higher interest rate, the more money you have in your bank account at the end of the year than you would have if you had always paid the maximum monthly payment. First, pay off all your student loans at high-interest rates and then work towards paying them back.
To help you pay back your student loans faster and regain your financial freedom, consider these efficient strategies over the next few months.
Why It’s A Good Idea To Pay Off The Student Loans Fast
The sooner you pay off your loans, the sooner you can stop worrying about your student loans and get out of education debt. Paying off student loans fast is a wise financial decision that will help you get rid of debt fast. If you pay them back quickly, you can focus more on pensions, homeownership, and savings.
The Debt Snowball
Best of all, if you get a newly refinanced student loan, you can ramp up the debt snowball even faster by offloading your student loans. The “avalanche of debt” method puts extra money into paying off student debt rather than paying it off at higher interest rates. And if you pay back your students “loans at the highest interest rates, you will pay them back faster than before.
Student Loan Repayment Calculator
Using our Student Loan Repayment Calculator, you can see that it would take you a full ten years to pay off your student debt by August 2030, which adds up to an additional $24,903 in interest over the term of the loan. If you had a $10,000 student loan with a 5% interest rate, and your payments increased by only $25 a month, you would save about $820 in interest and pay off in less than two years.
Seven Ways To Pay Off Student Loans Fast
Before you throw in the towel and forget about life, you should know that you can manage your student loans intelligently, repay them faster and cheaply, and live debt-free. Below are seven methods to help you pay back student loans more quickly so we can move on to other financial goals. If you’re serious about making this work for you, here are a few tips that can quickly help anyone repay their student loans. Try these seven things to pay off your student loan debt faster, get out of debt, and get back into life!
1. Make Additional Payments The Right Way
There are no punishments attached to paying off student loans early, nor are there penalties for paying more than the minimum. However, there is a warning with excess repayment. Student loan servicers, responsible for collecting your bill, may transfer the extra amount paid to the next month’s payment.
This method will increase your due date but won’t help you pay off your student loans faster. Instead of this, you should notify your servicer, either by mail, online chat, or by phone, to put the overpayments on your current balance and to maintain next month’s due date as planned.
You can make an extra payment at any point of the month, or you can also make a single large payment of student loans on the due date. Either of the two can save you a lot of money.
Take, for example, let’s assume you owe $10,000 with an interest rate of 4.5%. If you are paying an additional $100 per month, if you are on a ten-year repayment plan, you’d be free from debt five years ahead of time.
2. Refinance If You Have A Steady Job And Good Credit
Refinancing student loans can assist you in paying off student loans faster without making additional payments.
You are refinancing student loans exchanges multiple student loans with a single private loan, usually at a lower interest rate. To speed up your repayment, choose a new loan term less than what they left on your existing loans.
Choosing a shorter term may increase your monthly payment. But at the same time, it’ll assist you in paying off your debt faster and save money on interest.
Take, for example, refinancing a student loan of $50,000 from 8.5% interest to 4.5% could allow you to pay off your student loan debt two years faster than the required time. This method would also help you save the interest of about $13,000.
You are a credible candidate for refinancing if you possess a good credit score of at least 600 highs, a stable and solid income, and a debt-to-income ratio below 50%. You should not refinance federal student loans if you need programs like Public Service Loan Forgiveness and income-driven repayment.
3. Enroll In Auto-Pay
Just in case you don’t want the option of refinancing your loans, enrolling for auto-pay is another possible way of reducing your student loan’s interest rate.
Federal loan services for students offer a quarter-point rate interest discount if you allow them to remove payments from your bank account automatically. Many private lenders also offer an auto-pay deduction.
The savings from this discount may be minimal. Lowering a $10,000 loan’s interest rate to about 4.25% from 4.5% would save you more than $140 if it is a 10-year repayment plan. Yet that is still additional money to assist you in paying off student loans fast.
You can reach out to your servicer to enroll or make an inquiry about the availability of an auto-pay discount.
4. Make Biweekly Payments
Making biweekly payments is a simple method of tricking yourself into paying additional on debt. So, this means instead of making one full payment every month, you would only be paying half of your payment every two weeks.
By so doing, you will end up making an additional payment every year, cutting time off your repayment plan and also some money off your interest costs. Make use of a biweekly student loan payment calculator to discover how much money and time you can save.
5. Apply For Loan Forgiveness
Loan forgiveness programs can eradicate some of your student loan debt, but each forgiveness program has its unique requirements and rigorous approval standards.
The most notable program is the PSLF (Public Service Loan Forgiveness). For you to be qualified for this forgiveness program, you must be fully employed in a public service position either by a nonprofit organization or by the government and make 120 qualifying payments under an income-driven repayment plan.
It isn’t easy to get approved for the program, so you need to carefully read through the details to stay on track.
The TLFP (Teacher Loan Forgiveness program) is another forgiveness program option. To be qualified for this, you need to have an eligible loan under the FFEL (Federal Family Education Loan Program) or Direct Loan Program. You must be a full-time teacher for five consecutive years in an educational service agency row-income school.
One of those years must at least be after the 1997-98 academic year. Depending on your specialty, the forgiveness program forgives up to $5,000 or $17,500.
If you are also on an income-driven repayment plan, it is possible to have part of your student loan forgiven. Once the 20 or 25-year repayment period ends with these programs, they will forgive the remaining balance irrespective of its high.
6. Stick To The Standard Repayment Plan
Automatically, the government set federal student loans on a 10-year repayment schedule. If you can’t make substantial additional payments, another faster way you can pay off federal loans is to stick to the standard repayment plan.
Federal loans make income-driven repayment plans available, prolonging the payoff period to about 20 to 25 years. Depending on your balance, you can also consolidate student loans, which repay to a max of 30 years.
7. Get A Part-Time Job In College
One of the effective ways of paying off student loans is by getting a part-time job while you’re still in college. This habit is effective because you can use the earnings you get from the part-time job to pay off some of your debt.
This method is a good option, especially for students who can effectively manage their course work while working, without affecting their academics. You should check your school’s career center or resources to see vacancies for students who need on-campus jobs.
Should I Pay Off My Student Loans?
According to Hughes, an ACP certified consultant specializing in repaying student loans, building a nest egg worth at least three to six months can help prevent tapping into 401 (k) or other savings accounts in uncertain financial times. Paying off student loans is a wise decision when you’re in the market for other loans, including car and mortgage loans, because it can improve your debt-to-income ratio, and that can help you become more attractive to lenders. Early repayment of your student loans can save you interest over the term of the loan and money that you can use for other significant expenses such as a down payment on a home. If you have a variable loan, early repayment will prevent you from dealing with market fluctuations and will save you money. Paying off your personal and government loans earlier can save you thousands over the life of your loan because you pay less interest.
Many college grads can’t afford both mortgage payments and student loans at the same time, so instead of pouring money into student loans to put into homes, consider saving for a down payment. Student loans often have low-interest rates, so it is best to focus first on repaying the higher-interest debt. Full repayment of loans will positively impact your credit history but will not dramatically impact your credit rating.
Which Student Loans To Pay Off First?
There is no simple answer to the question of which student loans must be repaid first: subsidized and unsubsidized loans do not come with subsidized interest, so you must defer payments. Private student loans have higher interest rates than federal student loans, so we suggest that you first repay them in order to save the most in the long run. Start with your unsubsidized loans with the highest interest rates and repay your unsubsidized loans later with higher interest rates.
While repaying high-interest loans is initially a smart way to save money, some people prefer to first focus on repaying loans with the lowest balances because they have lower interest rates than other loans with larger balances. Proponents of the debt snowball method argue that paying out the lowest balance first is more helpful than focusing on the highest. Dave Ramsey and many other experts believe repaying debt with lower balances will help you stay motivated because you will see more immediate progress.
Donors That Pay Off Student Loans
The website of several large national organizations (f.e. AmeriCorps) dealing with student debt provides a wealth of information and analysis on student debt and the impact of federal and state programs on higher education funding. For example, many states and municipalities, nonprofits, and a growing number of employers offer financial assistance to help people pay off their educational debts. In addition, the federal government provides free scholarships for certain vocational qualifications that are available to many government organizations, and several private nonprofit organizations offer numerous scholarships to help with student loans. Many states offer special programs to help college graduates pay off their student loans.
For example, the California Bachelor of Science in Nursing Loan Repayment Program pays licensed RNs in California up to $10,000 of their student loan in exchange for one year of service in prisons, veterans, and healthcare facilities. Another example is the Louisiana State Credit Repayment Program (SLRP), which provides student loans for physicians who work in inner cities and other underserved areas.
The vast majority of the different charitable foundations that can put money into your student loan debt require a commitment to volunteer or work on your behalf in exchange for help in the repayment of loans. While institutional charities that repay student loans are not standard, some individuals choose to repay them on their own. People can raise money by starting a crowdfunding campaign, or they can get friends, family, and community members to get involved.
How To Buy A House When You Have Student Loan Debt?
A recent study from Bankrate found out that 61 percent of millennials don’t own a home, and nearly a quarter of them say student loan debt is the reason why. But it’s possible to get a mortgage while juggling student debt, experts say. Owning a home does not affect monthly payments of student loans or income-based repayment plans, says Betsy Mayotte, president of the Institute of Student Loan Advisors, a nonprofit that helps borrowers with free counseling and dispute resolution services. Because student loans have lower interest rates and are tax-deductible up to $2,500 a year, it makes sense to put cash into a down payment to lower the total cost of a house.
Before you buy a house while taking out student loans, you need to know how mortgage payments affect your debt to income ratio, a measure of how much of your income goes into total repayment. When they decide whether to give you a mortgage, lenders consider your debt-to-income ratio (DTI), which is the percentage of your monthly income going into debt repayment. To calculate your DTI, add up your monthly expenses (such as debt to credit card, student loan, car payments, and scheduled monthly mortgage payment) divided by the number of your gross income. If you want more information, Bankrate provides a list of financial steps to improve your chances of getting approved for a mortgage, includes a chart of assistance programs.
The Bottom Line
Now that you know how much you owe to different loans, you are ready to develop a strategy to pay off your student loan debt. Once you’ve found your loans, you can formulate a plan to pay off student loans more quickly.
Paying off debt can be a great relief as it also allows you to focus your attention on other projects. Above are some of the ways that will help you to pay off your student loan quickly.
