More than two-thirds of bachelor’s degree recipients in the class of 2019 have student loans debt. The average amount of debt carried by these graduates was $29,900. For graduate and professional students, the student debt situation is considerably more terrible.
In 2019, the average student loans debt for master’s degree holders was $44,900. PhD graduates, on the other hand, graduated with an average of $107,500 in student loans debt. The longer you keep these loans open, the more interest you’ll pay.
Furthermore, if you have student loans debt, it might be tough to begin working toward other financial objectives, such as purchasing a home or saving for retirement. As a result, repaying these student loans debt, which may be a huge obligation, maybe a part of providing for yourself after graduation.
In reality, student loans debt data reveal that seven out of ten graduates have student loan debt, with an average debt of just under $30,000. If you’re like most borrowers, you want to pay off your student loans as quickly as possible.
Paying off your loans fast will allow you to save money on your student debt while also allowing you to fulfill other goals, such as purchasing a car or preparing for retirement. Fortunately, there are a few crucial tactics for quickly getting out of student debt.
We’ve included 19 strategies to pay off student loans debt quickly, as well as some essential facts on how to prioritize which debt to pay off first, below.
How To Pay Back Student Loans Debt Fast
You’ve come to the right place if you’re seeking ways to deduct your student loans debt faster and save money on interest. Here are seven ideas to help you get rid of your student loans faster than you ever imagined.
1. Make More Than The Minimum Payment
This is one of the simplest methods for getting out of student loans debt. Simply take your current payments and add more money to them. You should have your payments set up beforehand, so any additional money goes right to your principal.
One simple approach to accomplish this is to set up automatic payments that include the additional amount. This eliminates any uncertainty and makes it more difficult for you to change your view. It’s something even if you can only afford an extra $20 each month.
Begin with that, then gradually increase your extra payments.
2. Refinance Your Student Loans
Getting a new loan with a reduced interest rate is referred to as refinancing. You’ll save money in the long run if you maintain your payments the same or raise them while lowering your interest rate. With student loan refinancing, more of your payment will go toward lowering the main sum.
When you refinance federal student loans debt, you give up crucial safeguards like the option to employ an income-driven repayment plan, and you must qualify for a new loan based on your income and credit score. If you’re qualified, though, the savings from a lower interest rate might be significant.
3. Enroll In Autopay
If you don’t want to refinance your student loans debt, enrolling in autopay is another option for lowering your interest rate. If you allow your federal student loan servicers to automatically take payments from your bank account, you’ll get a quarter-point interest rate reduction.
Many private lenders also have an auto-pay option. The savings from this discount are likely to be minor: lowering the interest rate on a $10,000 loan from 4.5 percent to 4.25 percent would save you roughly $144 over the course of a 10-year repayment plan.
However, there is still money that may be used to help pay off student debts quickly. To enroll or find out whether an autopay discount is available, contact your servicer.
4. Make Bi-Weekly Student Loan Payments To Save Money On Interest
“Paying half of your student loans debt payment every two weeks equals a full extra payment every year,” says Betsy Mayotte of the American Student Assistance Association (ASA). You’ll also save money on the overall amount of interest you’d have to pay.
To discover how much you can save by making bi-weekly payments, use a handy calculator. The most important thing is to make both payments by the due date.
5. Start Early With A Part-Time Job In College
Getting a part-time work while in college is one strategy to keep student debt under control, because you can utilize the money to pay down your load faster. Assume you can work a part-time job that permits you to save $500 each month.
That’s $6,000 you can spend toward paying off your debts in a year. Furthermore, you can earn up to $7,040 per year without jeopardizing your need-based financial assistance status. Check with your school’s resources or career office to see if any on-campus positions are available.
On-campus employment are usually more accommodating of odd or demanding academic schedules.
6. Do The Math And Find Your Payoff Date
Do you know when you’ll be debt-free from student loans? You’re not alone if you responded no. When it comes to debt management, though, determining your payback date is always an excellent place to start.
Why? Because once you know the date, you can start working on getting closer to it. The simplest method to find it out is to: To see all of your federal student loans debt, go to the National Student Loan Data System, and to generate a list of private loan lenders, go to AnnualCreditReport.com.
Then, with your loan servicers, confirm payoff dates.
7. Pay Off High-Interest Loans First
Some of your student loans debt can have a higher interest rate than others. You’ll save more on total interest if you pay off the more expensive loans with higher interest rates first. While you must pay the minimum on all of your debts, directing any additional funds to your highest-interest student loans debt first can help you pay them off faster.
As a result, loans with lower interest rates will continue to accrue interest for a longer length of time than loans with higher interest rates.
8. Stick To The Standard Repayment Plan
Unless you specify otherwise, the government defaults to a 10-year payback plan for federal student loans. If you can’t afford to make large additional payments, sticking to the usual repayment plan is the quickest method to pay off federal loans.
Income-driven repayment options are available for federal loans, which can prolong the repayment period to 20 or 25 years. You can also combine student loans debt, which allows you to extend your payback period up to 30 years, depending on your debt.
If you don’t need these choices and can afford to continue with the regular plan, you’ll be on your way to debt freedom sooner.
9. Eliminate One Loan At A Time
It’s easy to feel overwhelmed and frustrated when you have many student debts to repay. This is why it’s critical to concentrate only on paying off one debt at a time. This entails paying minimal payments on all of your student loans while also making extra payments on one of them. Celebrate each victory (e.g., each time you knock off $1,000) as you begin to reduce the main balance.
10. Use A Cash Windfall
Cash windfalls occur in a variety of shapes and sizes. Lottery winnings, an inheritance, a settlement from a lawsuit or an insurance claim, and others are examples. You may be tempted to spend money you get unexpectedly from these or other sources.
It’s so enticing that Bankrate claims that lottery winners are more likely to declare bankruptcy three to five years after winning the jackpot. So instead of wasting money on things you won’t remember, put it towards paying off your school loans faster.
Even if you don’t inherit anything, many taxpayers receive a monetary windfall in the form of a tax refund once a year.
11. Take Advantage of Interest Rate Reductions
If you set up auto-pay, many student loan servicers will give you a discount on interest. After a set number of on-time payments, some lenders will lower your interest rate. Interest rate reduction programs differ per lender, so find out what choices you have for getting your rate lowered.
Remember that if you have $100K in student loan debt, even a little interest rate reduction might make a large impact.
12. Take A Job That Offers Forgiveness
Certain employment, such as public service or teaching, may allow you to repay your student loans debt in part or in whole. To get your student debts forgiven, all you have to do is complete the standards. For additional information, see our guides on Public Service Loan Forgiveness and Teacher Student Loan Forgiveness.
There is one drawback: in order to be pardoned, you must satisfy all of the conditions and complete the entire period of labor. Because these forgiveness programs are usually utilized in combination with income-driven repayment plans, your payments will be reduced, but interest will accrue. You’ll be left with higher interest charges if you’re not qualified for forgiveness for whatever reason.
Some states, in addition to the federal student debt forgiveness programs, also provide loan repayment aid (LRAPs). Work is frequently required as part of these LRAPs. If you meet the requirements, you may be eligible for assistance in repaying your federal (or, in some situations, private) student loans.
13. Lower Your Interest Rate Through Discounts
If you set up automatic payments on your student loans debt, most lenders will give you a 0.25 percent to 0.5 percent discount. Furthermore, if you satisfy specific requirements, such as making a particular number of on-time payments or taking out another loan with the same firm, private lenders may provide further interest rate savings. If you have private student loans, speak with your lender to see if there are any interest rate reductions or discounts available.
14. Avoid Extended Repayment Terms
Many federal student loan repayment choices, such as income-based repayment plans, allow you to prolong the time it takes to repay your debt. While this can cut your monthly payment and aid in times of financial trouble, if you want to pay off your debts faster, it’s preferable to avoid extended plans. When you extend your payback time, you’ll pay more interest and it will take years longer to get out of debt than if you stick to the usual plan.
15. Apply Your Raises
Hopefully, you have a position where you are compensated with annual raises. But, once you’ve been given a raise, what do you do with it? You might just buy more things, such as a larger television, a nicer automobile, or more exotic holidays.
But why not use some of it to pay down your college loans? Simply put half of your increase toward your student loan installments. Increasing your automatic student loan payments or shifting the funds to a savings account are also options.
16. Take Advantage Of Tax Deductions
For interest paid on qualifying loans during the year, the federal government allows you to deduct it from your taxes. Depending on your adjusted gross income, the law permits you to deduct up to $2,500. Both federal and private student loans debt are eligible for the deduction.
If you’re legally compelled to pay interest on a qualifying student loan and your filing status isn’t married filing separately, you can claim this tax deduction. For this program, there are additional adjusted gross income restrictions that are set annually.
To claim this deduction, you do not need to itemize. Those who qualify for the deduction might expect to save a few hundred dollars on their taxes, which could help them pay down their student loans.
“If you pay less in taxes, you may be able to pay down your debt faster.” “Speaking with a tax professional to ensure you’re taking advantage of any applicable tax benefits connected to your schooling is a smart idea,” Ferastoaru advises.
17. Earn Extra Money With A Side Gig
You might boost your income with a second work in addition to lowering your budget. Side hustles come in a variety of forms and sizes. You may provide an online service like tutoring, editing, or design. Maybe it’s time to clear out your closets and sell your gently worn clothing.
You may even establish your own cookie-baking business, like this TV producer did. You may utilize your side gig to make additional money in whatever shape it takes. Then, take those extra earnings and put them toward your student loan debt.
Your extra money will not only help you pay off your student loans debt faster, but it will also provide you the opportunity to acquire new skills (and have fun) in the process.
18. You Can Join the Military
If you have student loan debt when you join the military, you may be able to pay it off using the GI Bill or another kind of relief, such as military student loan forgiveness. To achieve debt relief, you’ll usually have to commit to a set number of years in the active military. Investigate some of the many programs to learn about the prerequisites and to consider your possibilities.
19. Realize Student Loans Aren’t “Good Debt” To Keep Around
You may hear people discussing “good debt” and “bad debt.” And, while student loans are typically a smart investment since they improve your lifetime earning potential and provide some tax benefits, it’s not a good debt to stick around.
The discussion over good debt vs. bad debt is essentially about how debt might help you raise the worth of something. It’s the worth of a wage in this scenario. However, although taking out student loans is a smart decision, leaving them unpaid is not.
The longer you wait to return a debt, the more interest you’ll pay. Of course, you may plan ahead when it comes to repaying student loans, but just labeling them “positive debt” as a reason to delay payments isn’t a smart idea.
Advantages Of Paying Off Student Loans Debt Early
Pay off your student loans debt fast, and you’ll be able to devote more of your attention to other financial objectives like retirement, property, and savings. Also, getting rid of a loan reduces your debt-to-income ratio, making it easier to qualify for other forms of credit, such as a mortgage or credit cards.
And at the end, you would pay less interest over the loan’s life because the shorter time you take to return your debts, the less interest you’ll pay. By paying off your loans early, you may easily save hundreds of dollars on the total cost of your loans.