Paying off student loans is one of the most dreaded tasks new university or college graduates face and may seem like an overwhelming task—but it doesn’t need to be. Whether you’ll be graduating from an excellent college or university, you can make a plan to pay off your debt early. However, keep in mind that this won’t happen overnight, and you’ll need to exert some effort.
But by following the strategies below, you can fast track your student loan repayments—making it more manageable, helping you pay it off early on, leaving you to enjoy life without any hesitation.
Start Early By Working During College
Getting a part-time job while attending school is a great way to keep your student loans in check since it provides you with money to offset student loan debt early on. If you’re working a part-time job and can put away at least $500 every month, which, in a year, sets you aside around $6,000, can significantly reduce your debts in no time. Just make sure you can manage your coursework and job without any issues.
You can find a part-time job by checking out your school’s resources or career centers to see if they’re hiring on-campus jobs. These are usually better than part-time jobs outside school since they’re generally more understanding of busy class schedules.
Make Extra Payments — The Right Way
There’s no penalty for paying students early on or paying more than the set minimum. However, there’s a caveat with repayment, and that’s student loan services may add an extra amount to your next payment. Thus, advancing your due date but won’t help you settle your debt faster. Instead, it’s better to instruct the service to apply an overpayment to your current balance following your next due date.
Doing this allows you to pay extra on any day in a month or make a lump-sum payment on your debt—saving you money and helping you settle your loans early on.
Refinance When Possible
Refinancing your student loans can pay it off fast without needing to make additional payments. Doing this replaces several student loans with one private loan at lower interest rates. You can choose a new loan term less than what’s left on your loan balance to speed repayment. Selecting a shorter period can increase your monthly repayment, but it’ll help you pay off your loans faster and save money via interest.
However, refinancing is only possible when you have a credit score of at least 600, a stable income source, and a reasonable debt-to-income ratio below 50%.
Pay Twice Every Week
This simple yet effective strategy is a great way to trick yourself into paying additional on your debt, where you can pay half of your payment every week instead of making a monthly payment. Following this strategy helps you make extra payments every year, ticking off some time off your repayment schedule.
Pay Off Capitalized Interest
Unless the federal government subsidizes your loans, interest will accrue even when you’re still attending school alongside your grace period and periods of deferment and forbearance. That interest will capitalize when repayment starts, meaning your balance will grow, and you’ll need to pay a more significant amount. It’s best to pay monthly interest payments when it’s accruing interest to avoid paying for capitalized interest—or before the grace period ends.
Although paying off capitalized interest won’t instantly speed up the payment process, it’ll reduce the balance you need to pay.
Follow the Standard Repayment Plan
The government will automatically place federal student loans on 10-year repayment timelines unless the students choose differently. However, if you can’t make large extra payments, the best method to pay off federal loans earlier is by staying on the standard repayment plan. They offer income-driven repayment plans, extending the payoff timeline to 20 to 25 years.
If that doesn’t work for you, you can consolidate student loans, stretching repayment to a maximum of 30 years, depending on your pending balance.
Use “Found” Cash
When you get a job and get a raise, it’s best to take advantage of it by using a student loan refinancing bonus or other financial windfalls to allocate a portion of it to your student loans is a great way to pay off your debt earlier. Some companies may pay off student loans as an employee benefit, but if yours don’t, you can always start a side hustle to pay your debt early on.
Although paying off your student loans early on is a great way to secure your future, it’s best only to do it after you’ve built a solid financial foundation by following the tips mentioned—helping you pay off your debts in no time.