As of 2021, the total student loan debt in the United States was a whopping $1.7 trillion dollars. Yeah, that’s a ton of money. And the way things are going, it doesn’t look like that number is going to be getting any smaller anytime soon. In fact, student loan debt in this country has increased over 100% in the last 10 years. And while certain politicians are talking about making big moves to alleviate the burden of student debt, for now, all you recent grads are still on the hook for your student loan debt, and that can be seriously stressful!
A lot of people take decades to pay off their student loans and are constantly in fear of losing their job because they wouldn’t have any income to make their payments. So, what’s the best thing to do in that scenario? Pay off your debt as soon as possible! Get your balance paid off and get that monkey off your back!
Unfortunately, getting your student loans paid may seem like a distant dream. But with these tips that I’m about to tell you, it could become a whole lot easier! This is a beginner’s guide to paying off your student loan debt fast! Let’s go!
Make Additional Payments – Avoid That Interest
The first tip for getting your student loans paid off as quickly as possible can be applied to pretty much any kind of debt. And the tip is basically to pay it off as quickly as possible! Let me explain. Just like a credit card balance that you let sit for months or years at a time, a student loan balance is going to accrue interest the longer you don’t pay it off.
So, how can you avoid paying more interest? Pay off your student loan debt as quickly as possible. Any time you can afford it, make additional payments and get that principal balance lower until your loan is completely paid off.
I know, I know, you want to get that new coat or that new car. But the fact of the matter is that when you spend money on something other than your outstanding student loan, you’re not just spending a dollar, you’re spending a dollar plus the interest you could have avoided by putting that money toward your loan repayment.
Do your best to exceed your minimum payment every month. Put as much money as you can afford towards your loan and you’re going to save yourself a ton of money in the long run.
But, if you’re having trouble figuring out exactly how much you can afford to pay each month, you should consider setting up automatic transfers with your bank.
Automatic Transfers – College Repayment Fund
If you’re the kind of person who isn’t very good at budgeting your expenses each month and you find yourself spending more than you should on stuff like eating out or new clothes, you should set up an automatic transfer to a separate savings account that’s devoted solely to repaying your student loans.
Then, every month when your paycheck comes in, a portion of it will automatically go into that separate account and you won’t be tempted to spend it on nonessentials, and you’ll never put yourself at risk of not being able to make your student loan repayment.
That way, you’re going to make your payments every single month, never get in trouble with your loan company, and if you have any money left over at the end of the month, you can put that towards paying down your principal even further, as I said in the last segment of this article.
If you’ve been following along with our Ideal Money videos, you’d know that you should probably be budgeting every aspect of your life. But student loans are perhaps the most important thing that needs budgeting, so set up those automatic payments and make it easy on yourself!
But perhaps the best way to make sure that your principal balance on your student loan goes down quickly is to get a head start on it. That’s right, I’m talking to you, current college students! Go get a job!
Get a Job in College – Pay Your Way
Now, I know college can be stressful, especially those long nights during finals week when you’ve been awake for like three days straight because you forgot to read a single page all semester. Yeah, I know the struggle. But if you think you can manage it, you should definitely consider getting a part-time job during college so that you can get a jumpstart on paying off your student loans. You might even be able to find a fun job like a bartender or a waiter. Or, hell, start your own business with one of our fire business ideas!
Imagine you start making $500 bucks a month from whatever job you decide to get. That’s $6,000 a year that you can put towards your student loan, which is no small chunk of change. And if you’re worried about your financial aid, you can technically make $6,970 a year without affecting your eligibility for need-based financial aid.
If you get a job and see your grade point average dropping like the desert sun, then probably quit and focus on your studies. But if you think you can manage to have a job and get through your courses, part-time work is a great way to start paying off your loan early.
This next tip doesn’t really apply to you kids who are still in college, but it might apply to you a few years after you graduate!
Consider Refinancing – Lower Your Rates
In most cases, your credit score is going to be at its lowest right after you graduate college. However, once you’ve graduated and been in the workforce a few years, all while making purchases on your credit card and paying off your credit balance, your credit score is going to improve a whole lot. And what does that mean? You probably qualify for a whole lot better rates than you got back when you first applied for your student loan.
If you choose to refinance your debt with a private company, you’re probably going to lose some federal benefits, so it might not actually be worth it. But, all I’m saying is you should shop around and see what kind of rates or loan terms you could get offered. It never hurts to look, especially if you’ve dramatically improved your credit score or increased your annual income in the last few years.
A good place to start is by contacting College Ave, Sallie Mae, CommonBond, Earnest, or any of the other reputable private student loan lenders out there to see if they have a dynamite offer for you. It might just help you pay off your student loan a hell of a lot faster.
But what would be the best way to pay off a student loan? Well, not having to pay it off at all would be pretty nice! And that might just be an option for you if you meet a certain set of requirements!
Check Out Loan Forgiveness – Debt Be Gone
There are several types of loan forgiveness programs out there that can just completely wipe away a portion of your student debt. That’s right, you can essentially qualify for free money if you meet certain criteria.
The most well-known of these programs is Public Service Loan Forgiveness, or PSLF. For this program, you need to have a full-time job in a government position or at a non-profit organization. Then, you need to be able to make 120 qualifying payments as part of an income-driven repayment plan. But once you’re through those payments, a large portion of your student debt can be forgiven. However, this program is notoriously hard to be approved for, so make sure you read through the fine print before you spend a ton of time trying to apply for PSLF.
Another forgiveness plan is the Teacher Loan Forgiveness program. To qualify for this one, your loan must be a part of the Direct Loan Program or the FFEL Program and you have to teach full-time in a low-income school or educational service agency for five consecutive years. If you meet all these requirements, you could potentially qualify for between $5,000 and $17,500 in loan forgiveness. That’s no small amount of money.
One other way that you may qualify for forgiveness is if you’re on an income-driven repayment plan for your federal student loan. If you make all the payments over your 20-year or 25-year repayment term and you still have some money left on the loan, that remaining balance will be forgiven.
With that being said, the only way you’re probably going to get a big break from the government on your principal is if you work in the government or as a teacher. Other than that, you can pretty much expect to be on the hook for your entire balance. However, you may be able to get a decent break on your interest by setting up automatic payments and getting a discount.
Get a Discount on Interest – Trustworthy Rewards
There are several ways that you might qualify for having your interest rate reduced. If you have a federal loan, you may be looking at a rate reduction of 0.25% to 0.5% if you set up automatic payments. The same thing goes for private lenders.
These lenders are willing to incentivize you to pay automatically so that they can be sure they’re going to get their money. And that 0.5% discount could end up saving you a ton of cash in the long run. If your loan is with a private lender, there are often other ways that you can get an even greater discount as well.
Check with your lender and see if they’ll slash your rate for making a certain number of on-time payments or maybe because you took out another loan with the same company. These discounts may be a half percentage point, but they could add up to big bucks over the life of your loan.
Another place where you might be able to get some discounts is not on your loan itself, but on your tax bill.
Look For Tax Deductions – Amateur Accountants
Now, I know we’re not all tax accountants and no one wants to spend their Saturday afternoon scanning through the tax code, but knowing what kind of tax deductions you qualify for with your student loans could end up saving you a boatload of money. And I think that might be worth an hour or so of boredom.
Basically, the IRS allows you to deduct up to $2,500 of interest paid during the year on student loans, depending on what your adjusted gross income is. So, if you’re paying a lot of interest on your student debt, and you’re not raking in the big bucks at your job, you probably qualify for this deduction.
This deduction applies to those with federal and private student loans, and you don’t need to itemize your tax return to claim this deduction. Most people who include this deduction end up saving a couple hundred bucks on their tax bill, and that could be a big help in paying off your student loans.