Today, I have a guest post for you from James, a fellow personal finance blogger. Enjoy!
Paying off student loans is never easy, especially when your payments take up a huge amount of your paycheck. Every time you get your paycheck, you can’t even feel excited because paying off your student loans feels like a never-ending task.
So, how can you pay off student loans faster?
It may sound too good to be true, but trust me, it’s not! These 9 tips can help you pay off student loans faster, but they will require you to modify your student loan repayment strategy.
1. Don’t Forget, Every Penny Counts
An easy way to pay off your student loans faster is to remember that every penny counts.
Adding even a small amount extra to your payment would be an easy way to make faster progress. Although you probably have automatic payments set up, any extra amount that you add to this is a bonus!
In the initial stages, if you contribute an extra $30 per month then it would still make a difference at the end of the year, adding up to $360!
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2. Track Your Debt Free Date
Have you tracked the date when you will be free of your student loan debt? Not yet? Then, start now.
Knowing your debt free date will inspire you to move closer to that date as quickly as possible.
3. Consolidate and Refinance Your Loans
Refinancing your loans is one of the essential steps to pay off student loans faster. The main aim is to reduce the interest rates, which means more payments go towards clearing off the student loan debt.
Editors Note: One good company to use for refinancing your student loans is Credible. They refinance all types of student loans, like federal, private, and even Parent PLUS loans. Their borrowers save an average of $18,668 by refinancing!
Plus, if you use my link to refinance your student loans with Credible, you can get a $200 referral bonus.
4. Choose a Job that Offers Loan Forgiveness
Everyone loves free money, especially when it can help you pay off your student loans. There are certain jobs, like public service work, that offer student loan forgiveness if you meet certain requirements.
But, there is a downside as well. You need to meet all the stated requirements, plus complete the entire term of work to receive the forgiveness.
5. Use Your Raise Wisely
If your job comes with a yearly raise, use that extra amount for your student loans.
You might have lots of plans in mind for what to do with the extra money when you get a raise. For instance, you might want to upgrade your TV, buy a better car, or take a vacation. But, if you utilize this extra money efficiently, you can pay off your loans faster instead.
6. Challenge Yourself
If you are looking for some extra money to put toward your student loans but you don’t want to take on extra work, an easy option is to decrease your spending.
You can motive yourself by doing things like a “no spend week”, or use a Savings Challenge and put the money toward your loans instead of a savings account.
7. Try the Two Week Payment Plan
This is a popular strategy among students. Instead of paying on your student loans once each month, you pay the loan every two weeks.
When you divide your payments into two, it won’t feel like such a huge amount. Plus, by paying every two weeks, you’ll get one month’s extra payments made each year because they are 52 weeks in a year and you’d be making 26 half payments, which is 13 full payments.
Additionally, paying more often means less interest will accrue in between payments, putting more of your money toward the loan principle instead.
You do need to double check that your student loans company allows early payments and how they work in order to take full advantage of this method.
8. Utilize Tax Deductions and Credits
You are likely eligible for the student loan interest deduction on your federal taxes if you are paying off your student loans.
Each year you may deduct up to $2,500 depending upon the interest rate you pay on your student loan. For this, you need to meet the requirements to get the tax benefits.
In addition, don’t neglect tax credits! Tax credits can be more fruitful compared to tax deductions. For instance, a tax credit of $2,000 can save you more money than a tax deduction of $2,000. So, make sure you utilize all the options available to you.
9. Use a Debt Strategy
The best way to pay off student loans faster is by adding extra money to your payments. There are tons of ways to
Additionally, you need a strategy to add this extra money to your payment.
There are two main debt strategies to choose from:
- The debt snowball – Paying the smallest balance off first
- The debt avalanche – Paying the highest interest rate off first
In general, paying off the highest interest rate first will save you the most money. The strategy remains the same that you pay just the minimum in all but pay off the student loan with highest interest first when you have extra money.
Bonus: Use a Cash Windfall
There are lots of ways in which you can get a cash windfall. Sometimes it may be in the form of a settlement from a lawsuit or insurance claim, lottery winnings, an inheritance, or something else. If you get lucky to get a cash windfall like this, it would be a wise move to use this to repay your student loan.
Follow the strategy that works best for you to pay off student loans faster. It’s never wrong to experiment and try out different things to see which yields better results for you.
James Paul is a personal finance blogger who write at Basic Finance Care covering everything about personal finance management and frugal living.