Are you tired of seeing a massive debt when you check your student loan account? When you click through your credit report online, do you cringe at the sight of what you still owe before you can truly be debt-free?
If so, you may want to learn how to pay off your student loans quickly. This guide contains nine strategies for reducing your debt and eventually paying it off entirely.
9 Tips for Paying off Student Loans Faster
You can pay off your student loans faster in many ways. These strategies depend on your income level, budgeting skills, and living expenses. It's essential to personalize them according to your needs to achieve the best possible results:
1. Pay Beyond the Minimum
Most people prefer to see the minimum repayment amount on the lower side. However, paying more than the required amount is one of the simplest ways to pay the debt quickly. The caveat is that student loan servicers often use the extra payment to advance your due date or cover the next month's payment.
Advancing the student loan due date does not pay off the debt faster. The reason is that the additional payment goes to late fees and interests before the principal. To resolve this, you may instruct your student loan servicer to apply any extra payments to the principal balance and maintain the following month's due date as scheduled. Lowering your principal balance means a smaller sum of money is owed for the interest to accrue on moving forward.
2. Prioritize Loans
You can handle multiple loans in two ways, whether they are all student debts or the rest are other kinds of loans. The first is the snowball method, where you pay the smallest loan before moving to any others. The snowball method encourages you to pay the debt because you see progress.
The second is the avalanche method, where you focus on the loans with the highest interest rate, considering they accumulate interest faster and take longer to pay down when making minimum payments. The avalanche method is ideal for borrowers with high-interest loans and is more effective financially as it can help save as much money as possible. However, both methods are useful for paying down debt more quickly than making minimum payments.
3. Make Lump-Sum Payments Whenever Possible
Have you received your holiday bonus? Did a family member leave you a sizable inheritance? Did you get a tax refund? Maybe you just sold a car, your home, or some collectibles and have more money than you need to survive. No matter the case, when you come across more money than you expected to have, you should consider using it to cover your student loan debt.
4. Schedule Bi-Weekly Payments
Student loans rarely assess prepayment penalties, so paying before the bill is due can be a wise habit. When you pay your bill multiple times in the same billing period, you can chip away at the debt much faster, and that's what making bi-weekly payments accomplishes. Bi-weekly payments may seem similar to monthly payments, but you end up making an additional monthly payment each year. The reason is that you will make 26 half payments over 52 weeks. That equals 13 whole payments. Yes, you will spend more money, but such a strategy can be seen as an investment in a debt-free future. An additional, smaller benefit of this strategy is that interest is calculated daily on federal student loans. Making payments more often lowers your principal, leaving less to calculate interest on.
5. Consider a Career in Public Service
Government employees usually have access to loan forgiveness programs. These programs can eliminate most, if not all, of your debt without paying a single dime. Two classic examples include the following:
- Public service loan forgiveness (PSLF): The program is available to full-time government employees in public service institutions or nonprofit organizations. You must also have direct federal loans under an income-driven repayment plan and make 120 qualifying payments.
- Teacher loan forgiveness: Generally, you must be a teacher and work full-time at an eligible low-income school or education service agency to qualify. You must also work for at least five consecutive years, with one of those years being after the 1997-98 academic year.
The downside of these programs is that you must desire a public service career. If you don't, you may spend five to 10 years in a job you never genuinely enjoy. But once your term ends, you are free of debt and can seek out the career you want with a healthy job history on your resume.
A caveat here is that your loans must be federal loans. If you have refinanced through a private lender, there is little chance that the loans will be forgiven.
6. Sign up for Automatic Payments
Setting up automatic payments is a smart approach to your student loans. It allows your student loan servicer to automatically deduct the payments from your bank account as planned — monthly or bi-weekly. This strategy ensures timely payments, and you may get an interest rate deduction for enrolling.
Some private lenders also offer loyalty discounts to borrowers with existing accounts alongside student debt. Others also provide graduation bonuses. These incentives vary from lender to lender, so it's best to contact the servicer to confirm availability and eligibility requirements.
7. Create a Monthly Budget
If you are a frequent reader of the Atlas Credit blog, you know we advocate for making a budget. When you budget your monthly expenses, you can see where to find extra money to pay off student loans quickly. Your budget should include:
- Utility and rent or insurance costs
- Entertainment costs, including dining out and subscription video services
- Groceries, gas, and other necessities
Once you have this written down, see where you can save money. Maybe you don't need three video subscriptions. Perhaps you can stop eating out for a few months. Even reduce your grocery budget by cutting coupons. You can find many ways to save when you know what you are spending, and all those savings can go toward paying off college loans.
8. Get a Second Job
One of the best ways to pay off student loans is to have more money to repay your debt. You get more money by making more money. Adding five to 10 extra hours per week at a part-time job or side hustle you can do from home can take you closer to paying off your student loans.
A side hustle can be something you feel passionate about. It won't even feel like work because you like it so much. When you choose your side hustle, think about finding something that doesn't cost much to start. You don't want to have to pay for supplies. You want everything you make to go toward extra money to pay off debt. Here are a few ideas for easy and enjoyable side hustles:
- Work for a rideshare service
- Walk dogs
- Babysit or housesit
9. Refinance Your Loans
Another way to make your student debt burden simpler is to refinance the loan. This process allows you to repay your current student loan by assuming a new loan, which could have a significantly lower interest rate. Remember, though, as you consider our student loan payoff tips, that once you refinance through a third party, you will no longer have access to income-driven repayment and student loan forgiveness programs offered by the government.
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Need help making a student loan payment that catches you off guard? Or maybe your student debt burden has interrupted your financial flow, and you need money now to handle other responsibilities. If so, consider applying online for a quick and easy personal loan from a bad credit, low credit, or no credit lender like Atlas Credit. Apply online today or visit any of our offices throughout Oklahoma and Texas.
