5 Ways to Pay Off Your Student Loans Faster
Student loan debt can feel burdensome and even hold you back from buying a house, car, or achieving financial wellness. Fortunately, it is possible to pay it off fast, but it takes a little sacrifice and a lot of consistency.
You won’t pay them off overnight, and it might take a little while to see progress, but with these steps, you can quickly get ahead of your student loan debt.
1. Determine your Minimum Payment
If you’ve applied for an income-based repayment plan or any other student loan payoff plan, determine the minimum payment for each loan. The minimum payment is the amount you must pay each month to stay on track, but we’ll need this number for reference.
2. Budget more than the Minimum Payment
Once you know the minimum payment due, create a budget that incorporates the minimum payment for each loan and determines how much extra money you have for your loans. Any extra money you receive should be allocated to the loan’s principal. Make your servicer aware of your intention with the extra money, and you’ll start knocking the principal balance down, paying the loan off faster.
3. Choose which loan you’ll Pay Extra Towards.
Order your student loan debt from smallest to largest balance. Don’t just take extra money and throw it haphazardly at a loan. Use the extra money toward the first loan with the smallest balance. Once you pay that loan off, take the extra money and minimum payment you paid to the first loan and add it to the second.
4. Find Ways to Have Extra Money
Find ways if you calculated your budget and don’t have any extra money.
Start a side hustle and dedicate the funds to your student loan debt
Cut back on unnecessary expenses and put the money toward your student loans
Dedicate any windfalls (tax refunds, work bonuses, etc.) to your student loan debt
5. Don’t Focus on Student Loan Forgiveness.
Too many graduates focus on the student loan forgiveness plans, looking forward to when their debts are written off. At a minimum, it takes ten years of payments before any student loan debt is forgiven. It’s not really an attractive plan that helps you save money. You’re better off making extra payments towards the principal early on, reducing the interest costs, and getting out of debt on your own.
Paying off student loans isn’t impossible. You need a plan to achieve financial wellness. Create a plan, stick to it, and increase the additional amount monthly. If you can only pay a small amount extra toward the debt, every little bit counts.
The more consistent you are with your payments, the faster you’ll pay the principal balance down, pay less interest, and get yourself out of student loan debt much quicker than any loan forgiveness plan allows.