Student loans have become one of the most common types of loans in the US. As tuition costs have risen, students are relying more and more on student loans to cover the cost of their education. But paying student loans back can feel like a never-ending process. So how do you cut that process into something manageable? Here are 9 easy tips on how to pay off your student loans faster.
1. Pay more than the monthly minimum
This should be your first plan of attack with ANY form of debt or loan. It is by far the simplest way to decrease your time spent paying and the interest you accrue.
The more you can pay each month, the more quickly you will pay back the student loans (fewer total payments), the less time there is for the loan to accrue interest. Both of these things save you money–it’s a win-win.
2. Apply any raises you get to your loans
Getting a raise is a great accomplishment. It means that you’ve been doing your job well and that you deserve to be rewarded. Generally, it also means that you can loosen up your purse strings a little and things will be easier. But what if you continued living on your previous salary? Putting the amount of your raise (or even 50% of it) toward your student loans can significantly decrease the amount of time you spend paying them back.
For example, say you make $40,000 a year and at the end of your first year you get a 3% raise. Your annual income is now $1,200 a year higher and you have to decide just how you’re going to spend that extra money.
Consider your options: You can buy yourself a new flat-screen TV, put a down payment on a new car, or add $100 a month to your student loan payments. If you have $40,000 in student loan debt, and your payments are around $300 a month, increasing your payment by $100 a month can cut over 2 years off of your repayment.
3. Trim your budget
Sticking to a budget is hard. Sticking to a tight budget is even harder. It means saying no to a lot of fun things. But cutting out deluxe cable (most of the good shows are on Netflix anyway) or a latte a day can add up in a hurry and all of those savings can help you to pay back your loans more quickly.
To help you see your impact, instead of simply cutting these things out of your life, you should take the money you would be spending every day, week, or month and use that money to make an extra payment on your loans. That way, you’ll see the actual impact of your sacrifice and be able to watch your student loan balance dwindle with every extra payment.
4. Avoid income-based repayment programs
If you’re having trouble paying your loans back, it can be really tempting to sign up for a repayment program that will lower your monthly bill. But, at what cost?
Most of these programs lower your monthly payment by extending your repayment period–requiring students to pay on their student loans for as long as 25 years!
So, if you’re trying to pay off your loans as fast as possible, then this is probably not the best solution for you.
5. Start EARLY
If you’re working while you’re in school, set aside some of your money to be used when it’s time to pay back your student loans or make payments towards the interest you’re accruing. It may not be as fun as going out for dinner with your friends, but you’ll thank yourself for it later.
You can also start repaying immediately when you finish school. Generally, you have a 6 month period of time before you have to start making payments, but that doesn’t mean you have to wait for 6 months to start paying. Plus, not paying for 6 months doesn’t mean you’re not accruing interest during that time.
6. Set a date to be done & STICK TO IT
Creating a goal date to have your loans paid off and writing it down can be a massive motivator. It gives you something to look forward to and a way to measure your success. Setting a date can also help you to create a budget and give you the motivation needed to stick to it.
If you manage to pay things off before your date, you’ve clearly #crushedit and deserve to finally get that new TV or car you’ve been putting off in order to achieve your goal.
Hint: Use a repayment calculator to help you decide on a REALISTIC date and budget!
7. Set an emergency fund
Nothing can throw off all of your careful planning and budgeting like unexpected car trouble or an accident. Having an emergency fund built into your budget will make it possible to stay on track with your payments no matter what comes up.
8. Check into any help your employer is willing to give
Many employers will include a retirement plan in your benefits package, but did you know that some will also help with paying back your student loans? If you’re working in public service you probably already know about public service loan forgiveness (and hopefully you’re well on your way to making your 120 payments and having your loans forgiven).
But if you’re working in the private sector, you may be able to get help as well. Many jobs offer signing bonuses and other incentives for accepting a position so you can either put that towards your student loans yourself or ask the HR department if there is any way student loan repayment help can be worked into your contract. After all, it never hurts to ask!
9. Pay every other week
If paying more than the minimum every month stretches your wallet a bit too thin, try making payments every other week. Many employers work with bi-weekly pay periods so paying every other week is a great way to make that schedule work for you.
Paying bi-weekly, you will end up making 26 payments per year so even if you’re only paying the minimum amount split between the two payments, you will actually end up making one extra payment every year!
This is an especially great option if you’re not the best at budgeting. Setting up an auto-pay to happen the same day as your paycheck for the same amount each time will help you to put a little extra towards your loans without really feeling it.