Collectively, we owe more than $1.7 trillion in student loan debt in the United States, according to the Federal Reserve. Student debt of $1.7 trillion is a 3% increase from 2020 and a far cry from the $905 billion we owed just 11 years ago. About 70% of graduate students are in debt.
Student loans are debilitating for many of us, stunting our wealth building potential until we fully pay off all that debt. “For most people who graduate from college, student loans are just a fact of life,” writes Credible. It may be a reality, but these loans should not control your life.
7 ways to pay off your student debt sooner
There is no doubt that student debt is increasing at an alarming rate. If you’re struggling to pay off those school loans, here are 7 ways to help you end your debt sooner.
1. Funnel of bonuses and increases in your debt
It can be difficult to use bonuses, raises, or even tax refunds to pay off debt, but the extra cash can be a great way to pay off debt much faster than just making our regular payments.
The next time you find yourself with a little extra cash, put at least some of it towards your student loans. Over time, channeling new money into your debts will help you reduce and eliminate your debts much faster. It’s usually a good idea to call your lender to make sure additional payments will be applied to your principal.
2. Refinance your student loans
Just like a home loan, refinancing your student loans can help reduce the amount of debt you owe. Many working professionals refinance their student loans to lower their interest rate.
Refinancing your student loans can save you hundreds of dollars to thousands of dollars every year. Borrowers generally choose to shorten repayment terms, which will increase the minimum monthly payment but significantly reduce the interest rate. Others will do the opposite and lengthen their repayment schedule by reducing their monthly payments.
Note that refinancing may require you to repay part of the loan during the process. Plus, a credit score of 650 or higher and a high income will increase your chances of refinancing your student loans in a way that saves you money.
3. Pay more than the minimum
Whenever you can, make payments that exceed the minimum amount required each month. Paying more than the minimum will help reduce the total amount of interest you will pay (without refinancing) over the course of the loan and will also eliminate your student loans much sooner than just paying the minimum.
Just like making extra payments after a raise, bonus, or side hustle, call your lender to make sure the extra payments will be applied to your principal rather than your next month’s bill.
4. Ask for loan forgiveness
Under certain circumstances, you may be eligible for student loan forgiveness. Student Loan Forgiveness can eliminate some (or all) of your student loans. But, you have to qualify based on your profession. For example, teachers can often apply for student loan forgiveness with those who work in the civil service.
The cancellation of student loans linked to Covid-19 amounted to more than 15 billion dollars.
5. Switch to bi-weekly payments
Instead of making one-time monthly payments, make bi-weekly payments (or bi-weekly payments). Over the course of the year, you’ll end up making an extra payment every year and you probably won’t even notice it.
Use automatic bank transfers to make this process easy and painless.
6. Autopay can help reduce your loan interest
Many student lenders will lower your interest rate if you sign up for autopay.
With automatic payment, a standard amount will be automatically paid out of your student loan balance, usually monthly. This happens without you having to lift a finger, which also means that you are no longer responsible for manually repaying your student loans.
Automation is a very powerful way to make debt repayment easier. It’s a win-win.
7. Find out if your company offers student loan repayment
Believe it or not, many companies in the United States will help repay student loans for their staff, including Aetna, Estee Lauder, and Fidelity Investments, among others. Note that you may not be repaid 100% of your loans, but any help from your employer is better than no help at all.
If you’re not sure if your company offers this benefit, ask your boss or the human resources department to see if your student loan repayment is available to you.
Americans owe billions of dollars in student loan debt. But that doesn’t mean we have to spend the rest of our lives paying off those debts. Use these techniques to dramatically reduce the interest rate or term of your loan.
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This article was produced and syndicated by Wealth of Geeks.
Featured image credit: Unsplash.