Paying back your student loan is never easy.
Be it a federal loan or a private loan, you have to sacrifice a big portion of your monthly pay check towards the repayment of your loan.
For some students who land themselves a good job, it is not too much of a stress.
But, not every student gets a high paying job immediately after finishing his course.
For these students, paying off a loan can be a big burden. Especially if they are already struggling to make both ends meet.
A loan term varies based on a number of factors. If your loan term is long, you may seem to be paying off the loan for a very long time. It will literally be years before you can actually enjoy a full month’s salary.
Now the question is, can you pay off these student loans faster and get out of this debt sooner? Yes, you definitely can. Here are some student loan pay off tips to help you:
Why pay extra when you are not required to? Well, paying extra can bring down your debt term drastically. Instead of paying your loan due once a month, try paying it twice a month. Not only will your debt be covered faster, your unnecessary expenses will also reduce. When you have lesser money to spend, you tend to spend it wisely.
Banks have the option of automatically debiting your account once your salary is credited. Set up your account in such a way that this extra amount (when you pay twice a month) is automatically debited from your account. This prevents you from changing your mind and spending the money. It is simple logic; you can’t spend the money that is not in your account.
Not many are aware of how long it will actually take them to be debt free. The lenders’ sites give you all the details and all you have to do is, log in and track your payments. When you calculate how long it will actually take you to pay off your student loan at the current repayment rate, the reality will hit you. You will automatically look for options to pay it off earlier and thus save more.
When you have multiple student loans at varying interest rates, it is not only difficult to keep track of, it will also be expensive. Consolidate all your student loans into a single loan. Refinance your student loans by taking out a new loan.
There are student loans refinancing options that will help you get a new loan at a lower rate of interest. This will give you more time to pay off the loan and also, you total interest paid on your loan will be lesser.
When you are blessed with a cash windfall in the form of a lottery or an inheritance, use it to pay off your debts. It is natural to want to use the money to buy yourself something expensive or spend it on something you have always wanted to.
However, it is always wiser to pay off your debts or at least set aside a part of the money. Set aside about 70% of your new earnings for your debts. This way, if not the entire amount, at least a major chunk of the loan is paid off.
Even if it is a tax refund, use majority of it to pay off your student loan. at the end of the day, you will be saving more than what you have spent as lesser the loan due, lower is the rate of interest to be paid.
The government has many student loan forgiveness programs to help the student to pay off their debts. There are many jobs that help you get forgiveness for your student loans. Compile a list of such jobs and narrow down on what suits your education, talent and interest, the best. This job can get at least a part of your loan excused.
The government also offers forgiveness programs for residing in certain area. The aim here is to economically develop the backward places. If you move to one of those places, you can get a part of your loan forgiven in addition to other financial benefits offered by that state.
Many states has specialised forgiveness programs for certain professionals. So, compile a list of such jobs and states and choose the best place according to your needs and profession.
Most of the jobs offer a yearly salary revision and a raise. When you get a raise, set aside that amount to pay off loans rather than increasing your expenses. Since you are used to living on a lower income, it will be easier to set aside this new amount in addition to your existing loan repayment amount. Now you have more money to pay off your loans.
The government offers a number of repayment programs for the student struggling to repay their student loans. What these repayment programs do is just give you more time to pay off your debts. They don’t make your debt go away.
So, if you aim to repay the loan faster, a repayment program is not your option. The more time you take on your loan, the longer you are going to be swamped with debt.
The government offers various tax deductions and credits. Check what are they and see where you fit in. paying your tuition fees can get you tax credits while paying off a loan can get you tax deductions. Use these wisely and you can save a sizeable amount of money and use it to pay off your loans. Interest rate reductions like the interest paid on your student loans can get you tax benefits and help you save more.
Now that you know what you should do to ensure a student loan pay off early, here are something you should not do. Avoiding these practices can help your financial budgeting and help you get debt free, sooner.
When you have just started earning your own money, the financial freedom cannot be described. Now you can do anything, buy anything or party away your money and no one can question you. It is very easy to get carried away and end up spending all your money. Instead plan only for a part of your earnings. Set aside a minimum amount, every month for your loans (apart from your monthly payments)
When you are in a financial crunch, lenders can help you by renegotiating your loan terms. You can either increase the payment term or reduce the interest rates or minimum payments. This will reduce your financial burden on a monthly basis, but will extend your debt period. Instead of renegotiating for a longer term, try to negotiate for a lesser interest rate. When you offer to pay up your loan faster, your interest rates will be reduced.
Many get sucked into the world of credit cards. When you don’t have to pay the money immediately, you don’t feel the pinch. Hence, you end up spending more than required or even anticipated. These credit card debts only add on to your existing student loans.
Instead of using all the credit on your cards every month, try limiting it. If you have cashbacks and other offers for using the card, make faster payments on your dues.
If you are going back to college to do another course, do not take out another federal loan or private loan. Taking out a private loan will be easy, especially if you go back to the same lender. Instead apply for scholarships and use the free money to go through college.
Once you finish your course, you will get a better job and you don’t have new loans to eat up your income.
Despite having a good job, sometimes it is just not enough to pay back your loan quickly. You will have your day to day expenditures and other financial commitments. Here are some ways to earn some extra money. The most important thing to remember here is that, this extra income is for your loan repayment and not to aid your expenditure.
There are many part time jobs that you can take up on a regular basis. If your work keeps you occupied the entire day, opt for weekend jobs. Sometimes you can even get a job based on occasions such as some rally, some show, etc. Sign up for such jobs, it will more income and more fun for you.
There are many options for freelancing. Every field employs freelancers these days. Identify what your talent is and what you would enjoy doing (ex: writing, painting, designing, photography, etc). When it is something you enjoy doing and is different from your regular job, it helps you break the monotony of your job. This way, not only do you get a distraction and regular infuse of excitement, you also get paid for it.
There are many assets that are required by many people. Put up your apartment for shared accommodation. If you can’t have a roommate all the time, put it up for rent when you are not going to be using it much. Have a busy week at work? Have an outdoor project? Or travelling for a meeting? These are opportunities to earn some extra cash.
There are people who want accommodation for just the weekend or a week, till their work is over or till they find a new place. These people are not going to move in with a lot of things and they will be gone quickly. Also, they will be willing to pay a little extra to have a roof over their heads. Just ensure you don’t charge as much or more than the closest motel or hotel.
You can even share your vehicle. Though this is more risky and can land you in trouble if your car were to get into some accident or get a parking ticket. You can make arrangements with a trusted friend or your roommate. If your friend does not want to pay you much cash, get them to fill the fuel tank regularly. Any income saved is an income earned.
When you work in the public service sector the government offers loan forgiveness. This is to promote the welfare of the society and hence incentives are offered to police officers, health care professional, legal practitioners, etc. When you opt for one of these careers and take out a student loan, not only do you get many loan options but the repayments are made easier too.
All debts are not bad. There are some debts that are good. These are debts that are incurred for the betterment of your future. Sometimes you may think a debt is an investment but on the contrary, it could be some unwanted bad debts that you are accumulating. Take a look below to know which debts are ok and which are not.
|Good Debts||Bad Debts|
|Student Loans||Private education loans when scholarships are available|
|Investment in a business||Investing in a business without researching well or considering other financial options|
|Investments||Clothes, shoes, etc.|
|Consolidating or refinancing your student loans||Credit cards|
Yes, when your student loans are paid off early. You are debt free when your life takes off. When you repay the loan in your 20s, you have fewer financial commitments and you can make location or career changes to repay the loan. When you get older, you will be bogged down with other financial commitments like marriage, children, investment, parent care, etc. Pay off your student loans early and start a debt free life when you turn 30.