Looking for ways to pay off your student loans faster? Paying off student loans ahead of schedule is a good way to get out of debt.
Eliminating any debt means more money in your pocket.
By paying it off early, you can save thousands of dollars in interest.
That’s money that can go to buying your first house, building up savings, and paying off other debts.
But with paychecks stagnating for many Americans, paying off these loans is not easy.
It’s, in fact, harder than ever before.
So how do you not only make the minimum payment but fast track your repayment plan to pay off sooner than planned?
Well, you are in luck.
Many borrowers against the odds have found ways to make early repayment of student debt work.
And you can too. The sooner you pay off, financially better off you’ll be.
5 Ways to Pay Off Your Student Loan
But before you jump into it, assess if paying off your student loan early is the right thing for you.
If you have credit card debts or other higher-interest loans, it may not be wise to prioritize student loans.
Generally speaking, it makes more financial sense to pay off your high APRs debts first. That’s because they accumulate more in interest faster than lower APR student loans.
Some of the high APRs you need to eliminate first include credit cards, store cards, and rewards cards. If you have an auto loan, be sure to check its APR as well.
Another thing to consider is your savings.
If you don’t have enough saved in your emergency fund, build the saving first. It’s the easiest and most accessible way to hedge against job loss and more.
Aim saving at least 6 months of your living expenses. If you are facing an uncertain time, add a few extra months on top of that.
There are other times you may want to put off paying off your student loans early. Marriage, divorce, relocation, and such bring tremendous shifts in your finance. It may be wise to get settled in your new life before focusing on student loan early repayment.
If you are completely set and committed to paying off your student loans early, read on.
Today I will share 5 proven ways to pay off your student loans early to avoid paying a hefty interest.
1. Use a Refund, Bonus, And/Or Monetary Gift
The easiest way to pay down your student loans in an impactful way is to make large payments every so often.
Come around the tax time, when you get a sizable tax refund coming your way, you can use that to pay down a chunk. And make the same commitment every year until you pay off.
You can also use your bonuses and, or monetary gifts to do this. If the thought of all your money going towards debts makes you cringe, do this.
Designate one source of those large sums of money to paying off student debts. Allocate the others towards something else you enjoy. So if you are putting tax refunds towards the early payoffs, save bonuses for other things.
The idea is to commit one source of money to eliminate debt. You’d be surprised how those a few thousand dollars can go a long way in paying off debts.
2. Cut Back On Living Expenses
Another way to pay off your student debts ahead of your schedule is to pay more than a minimum every month.
But that can be hard to do if all your salary is tied up in your living expenses. This is especially true if you live in a larger, expensive city.
But if you’re serious about paying off your loans early, you must cut your living costs.
If you live alone, consider getting a roommate.
If that’s not an option for you, consider downsizing to a smaller unit. There are other creative ways to cut down on your living expenses too.
One is your food costs. By simply bringing your lunch to work instead of grabbing one at a deli every day brings big savings.
If you like to eat out often, that’s ok. But I suggest you create a budget that allows you to keep the fun but stay conservative with spendings.
You’d be surprised how working with a budget can save you hundreds almost effortlessly. You’d become more conscious of your spendings and start making smarter decisions.
Also switching from the TV cable to Netflix or Amazon Prime can save you tons per year on entertainment.
3. Make Bi-Weekly Payments
When you set up automatic payments for your student loans, set it up to be bi-weekly. This will double your payments and finish off your loans in half the time.
Having this set up as soon you as you begin paying for your student loans can change your repayment game. Just like any other bills, you’ll eventually learn to have the discipline to make two payments a month. And paying more towards your debts becomes truly effortless.
4. Set up Auto Payments
Regardless of how often and how much you want to pay on a monthly basis, set up auto payments to get savings. This is particularly true with federal student loans. The US Department of Education offers a 0.25% auto-debit interest rate discount.
This is just for setting up auto-pay and paying your loans on time every month.
That’s not all.
Making on-time payments with autopay also brings another incentive. At the time of disbursement, there is a 1.5% up-front interest rebate. This went in effect in 2000.
But here is the catch. This 1.5% rebate is contingent on you making 12 consecutive on-time loan payments. If you fail to make any of the twelve loan payments on time, you have to repay the rebate.
So it pays to be on time with your student loans.
Read up more about the federal loans 1.5% up-front interest rebate.
5. Get Your Student Loans Forgiven
Student loans hardly ever get canceled or forgiven. Not even personal bankruptcy can forgive your student debts.
You must repay your loans even if you aren’t happy with the education received or couldn’t land a job after. You still owe the money you borrowed for your education.
This is true when you sign for your student loans as a minor. Unfortunately, your student loans will be with you for life until you pay off.
However, few qualify for loan forgiveness.
And that’s only if you are in public service.
If you are employed by a non-profit or government, you may qualify for loan forgiveness.
It’s under a program called the Public Service Loan Forgiveness Program. Since there are several qualifications, check out their list to see if you meet the criteria.