Paying off student loans isn’t fun, especially when you consider how much interest you are paying over the term of your loan. But what if there was a way to pay off your student loans faster and become debt-free earlier in life? Below, you’ll learn about the smartest and best ways to pay off student loans quickly.
If you are bogged down with student loan debt, you may feel as if you will never get out from under your obligations. By having this extra payment (or multiple student loan repayments) to make each and every month, you might also feel like this debt is keeping you from doing other things with your money, such as investing or saving for a home.
The Best Ways To Pay Off Student Loans
The good news is that there is light at the end of the tunnel. By taking advantage of certain student loan repayment strategies, just about anyone can pay off student loans faster and become debt-free.
From taking advantage of loan forgiveness programs to refinancing to paying more than the minimum payment more often than once a month, these tips will help you become debt-free before your 30s and 40s. You can even combine several of these money tips to further accelerate your payoff.
Plan For The Future
When successful people are asked how they accomplish great things, many will say that they first visualized what they wanted to achieve. In ridding yourself of your student debt, one of the first and best strategies is to envision what your future will be like when your student loans have been paid off.
For example, what would you be able to do once your student loans have been paid off? Would you start saving for a new home? Take more vacations? Start investing for retirement?
Although visualization is not technically a repayment strategy per se, doing so on a regular basis will provide you with the motivation to follow through on doing whatever you need to do in order to get your student loan(s) paid off faster. If you have a goal to look forward to, you will be more disciplined in reaching it.
Take Advantage of Loan Forgiveness Programs
If you have a federal student loan, then you may be able to have some or all of the balance “forgiven” by taking advantage of student loan forgiveness programs. In order to do so, you will need to work in a certain profession or live in a certain area of the country.
For instance, if you are employed at a federal agency for at least three years, you may be eligible to receive up to $10,000 per year on your federally-insured student loan – up to a total of $60,000.
Who Qualifies For Loan Forgiveness Programs?
There are also public service jobs that will allow you to cancel your Federal Perkins Loan. Just some of those graduates who can qualify in this area include law enforcement and corrections officers, family and child services employees, and public defenders.
If you are a public servant who has a loan that is other than a Perkins loan, then you may be able to obtain forgiveness of your student debt via the Public Service Loan Forgiveness Program, or PSLF. This program is available to any government employees – federal, state, and local – as well as those who work for tax-exempt entities or for-profit institutions with a qualifying service.
It is important to note that if you want to qualify for the Public Service Loan Forgiveness program, you will have to make a minimum of 120 qualifying monthly payments on your student loan, or basically ten years’ worth of payments, and your loan must not be in default.
You may also be able to have your student loan reduced or possibly even eliminated altogether by simply moving to certain areas. For instance, relocating to Niagara Falls, New York could get you up to $7,000 over two years.
Pay More Than The Minimum Amount
If your income allows you to do so, you could simply make more than the minimum payment on your student loan (or loans) each month. In this case, you will make the required payment, and then add more money to it. This extra amount will go towards paying down the principal directly, thereby reducing your interest payments in the future. Even small additional amounts of $25 or $50 per month can save you hundreds or thousands of dollars in interest costs over time.
Discount Your Monthly Student Loan Payment
You may be able to obtain a discount on your monthly student loan payment by signing up for the automatic debit option. There are many types of loans – including student debt – that will reduce your interest rate by a quarter or half percent when your payment is automatically deducted from your bank account each month.
Make Your Student Loan Payment More Often
Rather than just making monthly student loan payments, if your income allows for it, make a payment every two weeks. In this case, you don’t necessarily have to make the full amount of the payment each time – although if you do, you will really be able to see results more quickly.
However, even if you just simply split your regular monthly payment in half, and then pay that amount every two weeks, you will end up with an additional full payment every year. This is because you will have made the equivalent of 13 months of payments over the 52-week period of time.
Ultimately, the other benefit of this is that your payments are more quickly applied and your interest expense is reduced. This is one of the easiest ways to get rid of student loan debt fast without actually making any changes to your lifestyle or habits.
Consolidate Your Student Loans
Depending on the type of student loan debt you have, you may be eligible for student loan consolidation. This is a process in which students take multiple loans with different terms and payment schedules and combine them into just one loan with one easy monthly payment.
Furthermore, this payment may be lower than what you were cumulatively paying with the multiple loans because you may be given better terms and conditions. With a lower payment amount, you may then be able to add additional funds to the monthly amount that you send in – allowing faster payoff.
Refinance Student Debt
Similar to consolidation, you may also be able to refinance your student loans. Companies like CedarEdLending work with students to research and find lenders who can offer lower interest rates and better terms. If your current student debt is too expensive and you have good credit, refinancing your loans can make paying them off faster and easier to accomplish.
Earn More Money
If you are working full-time and are limited by the amount of money that you can put towards paying off your student loan(s), you could take on either another part-time job, do some freelance work, or start a small side-hustle.
By checking job sites for part-time work, you will likely be able to find something relatively quickly. You could also check the postings on Craigslist, in either the jobs or the gigs section, for short-term or part-time positions.
You could also consider making additional income as an Uber driver. Here, you will be able to determine your own work schedule, while at the same time earning money by simply driving people to the places you and they need to go.
If you would rather work from home and set your own hours, getting freelance assignments through websites like Upwork or Guru can be lucrative. And, because you can set your own schedule, you won’t be locked into certain days and times that you need to be somewhere.
Sell Stuff for Cash
You may be able to come up with some extra cash by selling unwanted or unneeded items that you have. For example, by going through your closet, basement, or attic, you might be surprised at what you’ve been keeping stored and what may be worth some money to someone else.
Likewise, if you have a gift card in your wallet that you aren’t likely to use, these can be sold online for cash. Or, if you have access to a Coinstar Exchange, you can receive instant cash for cards that are valued at $20 or more. If you have an old cell phone, tablet, or MP3 player that is just sitting in a drawer somewhere, these too could be worth some money on Gazelle or Swappa.
The Internet has made getting rid of items for cash fairly easy. Using websites like eBay or Craigslist, you can quickly list your items for sale, and have the cash in hand within days.
“Borrow” Money from Yourself
While it may seem like you are taking from one pocket to put into another, you could consider borrowing the needed funds from yourself in order to pay off your student loans. In this case, if you are enrolled in a retirement plan such as a 401(k) through your employer, you could obtain money from your account.
While not all employers will allow loans from their 401(k) plans, if yours does, you are typically allowed to borrow up to half of your total account balance, up to $50,000. And, you will have five years in which to pay it back.
It is important to note in this case that if you do not make any re-payments for 90 days, the funds that you have borrowed from your retirement plan will then be considered taxable income. Also, if you leave your employer, you will usually need to repay the loan within a shorter period of time.
Similarly, if you have a permanent life insurance policy, you could consider borrowing the needed funds from there. Permanent life insurance is the type of coverage that provides both death benefit protection and a cash value build-up. Should there be an ample amount of cash in the policy, this could be used for paying off your student loans.
The repayments that you then make to your life insurance policy will usually have a low rate of interest – and, if you do not end up paying back these funds, the amount of the unpaid balance will be deducted from the death benefit that your beneficiary receives.
Use Your Tax Refund or Bonus
Throughout each year, you may receive a nice lump sum of cash. For example, you may be eligible to obtain a refund on your taxes. You may also receive a quarterly or an annual bonus from your employer.
If this is the case, then you may consider using that cash windfall towards paying down your student loan debt. This can be so much more beneficial than going out and spending the money on something frivolous. Moreover, by paying off your student loan faster, you will be able to use future cash windfalls on other wealth-building opportunities.
The same holds true if you receive a pay raise at work. If you are used to netting a certain amount of money each month and you are comfortably able to pay all your bills, then by applying the additional income to your student loan, you will be able to pay it off more quickly.
Reduce Your Living Expenses Temporarily
If you can reduce your monthly living expenses, even just temporarily, then you could apply what you have saved to your student loan.
For instance, you may be able to go with a lower cost monthly plan on your cell phone or cable package. You can also save money each day by taking your lunch to work instead of eating out. The same goes for making dinner at home rather than going to a restaurant.
You should also take a look at your insurance policies, namely car, home, renter’s, and life. With car insurance, you may be able to lower your monthly or annual premium by either reducing the amount of coverage that you carry or raising the amount of your deductible.
If you really want to make headway, you may even be able to move to a less expensive apartment or find a roommate to help you share expenses. In doing so, you are likely to save hundreds of dollars each month that could instead be applied to your student loan payoff.
Although your financial situation with student loans may seem impossible and frustrating at first, by settling on some of the above strategies and remaining focused on your goal, you can rid yourself of your student debt obligations faster than you think.
Contact us to learn more about your student loan consolidation and refinancing options.