The best way to pay off student loans quickly is to pay more each month. The more debt you pay, the less interest you will owe.
Using a student loan payoff calculator to see how easily you can get rid of your loans and how much interest-bearing money you can save, is a great idea.
Aside from these start-off tips, we’ve prepared seven methods to help you with student loan repayments.
Make Extra Payments the Correct Way
You can make an extra payment at any point in the month, or you can make one larger payment on the due date. This way you can save lots of money.
Let’s assume you owe $10,000 with an interest rate of 4.5 percent. By spending an additional $100 per month, if you were on a 10-year installment program, you will be debt-free in just five years.
However, student loan servicers may add the extra amount to pay next month. This will extend your due date and prevent you from quickly paying off student loans. The best thing to do is to notify your service provider and add overpayments to your current balance.
Pay Off the Highest Interest Loans First
When you intend to pay off one or more of your loans ahead of time, start with the highest interest rate first.
When you have private loans separate from federal loans, start by paying more on those first. This is because they will almost always have higher interest rates and lack the flexible repayment options and other federal loan benefits.
Split Payments in Two
Another trick you might use to pay off your debt more efficiently is to split your monthly payment into two.
For example, if you have $300 due at the end of each month, make one payment on the 15th of $150 and a second payment on the 30th of $150. This will make payments a little easier to handle.
Enroll in Autopay
If you don’t want your loans refinanced, signing up for autopay is another way to lower the interest rate on your student loan.
Federal student loan servicers offer a quarter-point interest rate discount if you authorize them to deduct payments automatically from your bank account. Many private lenders often provide a discount for auto-payments.
Lowering the interest rate on a $10,000 loan from 4.5 percent to 4.25 percent would save you about $144 in total, based on a 10-year repayment plan. To register or find out whether an autopay discount is possible, contact your servicer.
Leverage on Tax Deductions & Credits
You’re likely to be eligible for the interest deduction on your federal taxes when you have student loans.
The exemption from student loan interest tax helps you to minimize your taxable income by as much as $2,500 for interest charged on student loans for the year you are filing.
Find Ways to Save at the Same Time
Living above your means and making no savings is one of the fastest ways to fall in debt.
When making regular monthly contributions to student loans, set up a savings fund and put a fixed sum of money into it each month.
Earn Extra Income
Despite the gradual increase in student loan debt, it’s no wonder why millennials are beginning more side hustles than generations before.
Gig work not only offers a flexible way to raise income, but it also encourages workers to follow their interests, learn new skills, and have fun in the process.
If you’re selling your clothes on Poshmark, or, being a personal shopper, discovering new revenue streams will give you greater financial independence.
Understand the interest rate on your student loan and find out if there is a lower rate available. Don’t worry about negotiating the cost.
By consolidating your student loans, you may be able to refinance your monthly debt, or both, at a lower interest rate.
Try out these tips now.