Tips to Pay Off Student Loans
Currently, there is $1.5 trillion in student loan debt owed collectively by 44 million borrowers in the United States. Student loan debt has ballooned to be higher than credit card debt and car loans. In the class of 2016, the average student had accumulated $37,172 in loan debt to finance their educations. Student loan debt hangs over graduates' heads for years, and the accumulating interest can make paying them off seem like a never-ending process. Here are the best tips for paying off your student loan debt fast, even if you're on a strict budget.
Check out income-drive repayment plans.
If you've taken out federal loans, look into setting up an income-driven repayment plan. Your monthly payments under this type of plan are based on your income. This can be a great option for a recent graduate who isn't making any income yet. Once a year, you have to update your loan service provider as to your current income, at which point your monthly payment will be calculated anew. Don't have an income? Your monthly payment will be zero.
Pay more than the minimum each month.
This is the best trick for tackling your student loans. By paying more than the minimum each month, you can reduce the amount of interest that accrues. Put extra money to your principal balance so that you can see your debt disappear more quickly. Even if you're only able to afford an extra $20 or $30 a month, it's still something and adds up.
Ask your employer about student loan assistance benefits.
Most employers don't offer them, but more and more companies are starting to offer contributions to student loan debt as an employee benefit. Some companies that offer this benefit include Fidelity, Aetna, Staples, and Penguin Random House. You can do a quick web search to find other companies that offer this option, and you can always bring it up with your HR department as something for them to consider.
If you have good credit (usually a credit score above 690) and a steady income, consider refinancing. You could end up with a lower interest rate which can save you thousands of dollars in the long-term. You may choose a shorter loan repayment term, which can help you pay off the debt faster and save even more on interest, though a shorter repayment period may increase your monthly payments slightly.
Increase your earnings.
Whether it's through finding a new, higher paying job or by developing a sidehustle, try to increase the amount of money you bring in. You can drive for Uber, sell handmade jewelry on Etsy, offer your services on Fiverr as a resume-writer or video editor, and more. All of the extra money from your new income should go towards your student loan debt in order to pay it off as quickly as possible.
It goes without saying, but living as simply as possible to put every extra penny towards your student loans will help you pay them off fast. We know one person who, upon accepting her first job after college, decided to spend the first year living the way she did as a student. She managed to pay off all of her student loans in one year this way. Did she like living off of ramen and living with roommates when she had the income to do otherwise? No. But the relief she felt when she made that last loan payment a year later was worth it. You may also consider moving back in with your parents for a period of time to save money. Bring your lunch to work instead of eating out. Set a budget for yourself, and stick to it.