The student loan crisis in the US is at its worse, with over $1.6 trillion in student loan debt, distributed among some 44 million students. With the average student loan debt ranging around $39,400, every graduate is trying to find unique ways to pay off their student loans faster.
People tend to opt for all sorts of different ways to put an end to their student loan debt. From odd jobs to extra/side jobs, to freelancing – people have tried all sorts of ways to pay off student loans faster.
However, most people don’t know that there are some ways to make debt life easier. Going in blind never works out, it’s always good to know your options and plan accordingly.
The following are some ways to pay off student loans faster.
Organize Your Repayment Strategy
You need to get a complete outlook on your debt situation. This means you should go and check your federal student loan amounts at the National Student Loan Data System. If you have private student loans, you can check them by going through your credit report.
It also helps to keep track of any other debt you have, such as vehicle debt, credit card debt, or mortgages. It will help you strategize your payments.
You should also note down all your balances and the interest rates on your loans. Calculating the interest payments will help you understand your situation. Maybe you can postpone some payments or maybe they’re more affordable than you thought.
Pay Above the Minimum Payments
Most people don’t realize this but paying just above the monthly minimum can tremendously reduce your interest payments and debt period. Even if you end up paying a little more, it ends up saving you a lot in the long-term.
You can save up a little more for this by not spending much money on eating out, or personal expenditures such as video games. Spending money strategically can help you pay that extra amount.
According to Business Insider, paying only $100 more in monthly payments can reduce the loan period by 32 months, and help you save up to $5,000.
Refinance and Consolidate
Loan consolidation helps you combine your loans into one big loan payment per month. It helps you organize your loan payments and gives you a clear idea about your payments and interest rates. This lets your loan’s interest rate with the current market rate.
If the current rate is lower, you can negotiate for that lower rate which would mean you now have to give lower interest payments. This means that a bigger chunk of your payments goes towards paying off the principal amount.
You can refinance your loans after consolidation to get that lower interest rate, and even, lower monthly payments.
Try a Side Hustle Out
Side hustles are practically any legal business practice that helps you earn extra money on the side. This can also help you follow your passion by trying something that interests you. You have fun, learn new skills, and supplement your income, all at once.
You can try to sell clothes, set up a food stand, or freelance on online sites.
Leverage Tax Deductions and Credits
If you have student loans, you can go for an interest deduction on your federal taxes. You might need to properly apply for it by providing details of your loans.
If you succeed, you can shave off up to $2,500 in your taxable income to pay for the interest on your student loans. The good thing is that it’s not a one-time thing, and you can do it every year.
The money you save can go to a little extra on your payments. As previously mentioned, even $100 can make a huge difference. Hence, saving $2,500 means you can pay up to $200 extra every month, while still saving $100 by the end of the year.
Saving is Key
While you shouldn’t compromise on your living standards, it doesn’t mean spending money on unnecessary things. It’s essential to save some money over the years, or you can end up in even more debt. You can take out a credit builder loan to improve your overall financial condition for the future.
While you set up a way to make your monthly payments, you should also set up a way to save a certain amount of money each month. You can set up a savings fund or set up automatic savings.
If you work for a company like Cisco that provides benefits like tuition reimbursement, you can use that to pay for any current fees. This would let you save additional money for any future needs.
All in all, you can use some, if not all of these ways to either reduce your monthly payments, reduce your loan period, or just improve personal finances. Out of all these ways to pay off student loans faster, the common thing is that you need to properly plan and strategize it all.