Graduating from college might be a long standing dream come true for a few and might be a time to party for a few.
But as such it comes with a heavy commitment for decades for students who have availed of student loans.
The whole idea of being in debt, for the long term, creates a kind of fear in the minds of the students.
The very thought of shedding a huge amount of money from your paycheck towards your loan can be devastating.
The thought of debt and the repaying them might seem gigantic and never-ending but with planning and proper repayment strategy, this task might appear achievable.
Whether you’re a fresh graduate or are still in school, and if you have started repaying your student loan, these tactics will help you keep your Student loan debt under control.
Here are the Top 10 ways to faster Student Loan Paying Off:
Consolidation of your loans means combining your various loans into one single loan. Refinancing your student loan is a faster option for faster student loan paying off.
The ultimate aim of refinancing is to bring down the interest rates, which means more of the payments will go towards the principle amount of your student loans and thus enable faster completion of the loan.
Another interesting factor with refinancing is that you can also get loans with interest rates of as low as 2% on a monthly repayment schedule.
This is one of the easiest and the simple way to pay off your debts faster. Don’t stick on to the minimum payment that is fixed for a month. Add on to that minimum amount and pay a bit higher. No matter how small that extra amount is. It will surely sum up to something big at the end of the year. This will definitely reduce the length of your loan and your commitment.
During the course of student loan repayment, there might be chances of you inheriting ancestral property, winning a lottery, a settlement amount or anything that luck favors you. Even if you are not that lucky you are sure to receive yearly cash windfalls in the form of tax refund.
It is more likely that human mind tends to spend such sudden cash inflow in leisurely and luxurious ways. Instead of going in your minds path, use your heads to calculate how much of that windfall could be used to pay back your student loan.
In case you are in a job that offers yearly raises or bonuses, then try applying a part of your raises towards the repayment of your loans. This might seem to be a bit too honest. But in due course you will surely realize that your honesty will get rewarded and your loans closed early.
The standard 10-year repayment plan is the most commonly chosen repayment plan by most of the lot. However you can extend your payment period that will lower the monthly payments. But you will end up to paying more interest over the period chosen above the standard plan.
You can opt for income-driven plans as given in the table below, which will minimize your monthly payments while maintaining a reasonable percentage of interest.
|Repayment Plan||Amount to be Paid||Repayment Period|
|REPAYE – Revised Pay As You Earn||Approximately 10% of your income||20 years for undergraduate loans
25 years for Graduate loans
|PAYE – Pay As You Earn||Approximately 10% of your income or the 10-year Standard Repayment Plan Amount, whichever is lesser.||20 years|
|IBR – Income Based Repayment||In case you have taken the loan after July1 2014, Approximately 10% of your income or the 10- year Standard Repayment Plan Amount, whichever is lesser.||If you are a borrower on or after July1 2014 – 20 Years, else 25 years.|
|ICR – Income Contingent Repayment||20& of your income or the repayment amount for a standard 12 year repayment plan, whichever is lesser.||25 years|
Another widely prevalent extra payment strategy for student loans is to make a student loan payment once in two weeks. Wait… It doesn’t mean that you pay twice the amount of your monthly due, but it actually work like splitting your monthly pay into two and making that payment or a little more bi-weekly.
The real potential of this strategy is that if you will not feel the burden of paying the extra amount.
Certain jobs, like public service or teaching, may make you eligible for the loan forgiveness program such as teacher loan forgiveness or public service loan forgiveness, for a part or all of your student loans.
All you have to do from your part is to meet the necessities to get your student loans forgiven. However this also has the other side of the coin, you need to fulfill all the requirements (a bit tedious) and complete the full tenure of work required to be eligible for the forgiveness.
Since these forgiveness programs are generally used in combination with income-based repayments, your payments will decrease but interest charges will accumulate. One more bitter truth is that if you ever wind up ineligible for forgiveness for any reason, you are going to be in a muddle, stuck with greater interest charges.
If you’re a single payer or you’re paying back student loans on behalf of a dependent, you could probably enjoy a refund (up to $2,500) for education related expenses– all credit goes to IRS education credits and student loan interest deductions.
What are the eligibilities to qualify for student loan tax credit incentives?
Tax credits are often more valuable than tax deductions. In fact, with a $2,500 tax credit you save more than the money from a $2,500 deduction.
One universally acclaimed aspect is that if you cannot manage your expenses with the current income, minimizing your expenses is the only way out. This holds well in this case of Student loan repayment as well. If you want to repay your loans faster but do not have a high-paying job, then one thing you can possibly do is to trim down your budget.
The key to success is the fact that this is indeed a short-term goal. This budget cuts are just until you are focused on faster student loan paying off.
The grace period is the duration you’re offered prior to beginning repaying your student loan after your graduation. This grace period differs for private students so you should discuss with your lender for precise information.
Work out on a plan before this grace period lapses and this will help you make a significant initial down payment that will probably reduce the debt by at least 10%. Also be sure that you know the due dates for payment to avoid unnecessary interests.
Now that we have discussed about the ways and strategies towards faster Student Loan paying off, it is time for us to concentrate and understand as to what to pay first and how to devise an effective plan to come out of your student loan debt.
How to Start & Head towards Faster Student Loan Paying off:
Most of the students might have taken loans from various lenders including private and federal and the very thought of how to do it all makes it even more painful.
As a borrower your main focus should be paying off your private loans first since they do not offer any flexible repayment options.
It is always good to pay off your private loans first but that doesn’t mean that federal loans can be neglected. A loan is a loan and has to be repaid whatsoever.
It’s vital to take advantage of the flexibility and various income-based repayment options that come with federal loans if it happens to be necessary. Do not expand the length of your repayment or reduce the monthly payment amount. Remember, the ultimate objective is to overcome debt—the faster, the better.
If you are a person who has availed of both federal and private student loans, then you may be dealing with high interest rates and multiple lenders. Both of them are major hindrances. Handling multiple payments and lenders are often a headache. However, there are alternatives.
Whether you have either federal and private student loans or only private ones, refinancing can prove to be a smart choice. Usually, lenders prefer candidates with good credit scores, steady employment, and sufficient income to pay off their loans.
Now that you are aware about which loans to pay off first with the following factors as a niche:
* Begin with the private ones, and then move on to the federal ones.
* Always make at least the minimum payments for all of them.
To do this you have to devise a smart and wise plan.
There are a variety of methods from which you can choose or even mix and match to reach your goal of becoming free of debt faster:
While the first method supports you logically, the other provides motivational strength. Though both methods work, it’s important to choose at least one to begin paying away at your debts faster and smarter.
It doesn’t really matter how much you actually owe or what your financial situation is. A Student loan debt cannot normally be settled in bankruptcy. Most of the time, the only way forward is to get on an effective payment strategy and stick to it – whether you enjoy it or not.
Always bear in mind all these goes into your credit record and will play a major role in deriving your credit score that is going to design your future financial position.
Though the very thought of student loan repayment seems to stand mountainous and a hard task to manage, it’s always easier done with a plan. Here’s what to pay off first:
The ultimate key to minimizing the impact of your debts is exploring all your repayment options and choosing the best solution that suits your debt levels and personal goals. There are several ways to get out of debt faster, lower your monthly payments, and save money along the way.
With all the researching and exploration about the repayment options, in search of an answer to the query about what are the possible ways and how to effectively payoff student loans faster, it is up to us to formulate the effective strategy and choose the best tactics to emerge as a debt-free person.