10 Ways for Paying Off Student Loans Quickly

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The average student with debt has $37,000 in student loans when they graduate from college. I was extremely fortunate to have my parents pay for my undergraduate degree, allowing me to graduate debt-free.

Going back to school for more titles next to my name was never something I wanted to do, but coming from immigrant parents, you are always pushed for more. The simple act of attending school, regardless of how old you are or how much it costs, keeps Caribbean parents motivated. This time, however, things were a little different for me.

Staying at home after losing what I thought was my-dream-job felt odd. So, I chose to go back to school and get my Masters. Of course, I’ll be the one to bear the cost this time.

Things didn’t go as planned once more. I dropped out two semesters before finishing my degree due to unforeseen circumstances. Six months later, Nelnet [loan servicer] informed me of my future installments – this I expected, but not the minimum amount.

Today, I’ll give you some guidance on how to pay off your student loan quicker so you may reach your debt-free goal sooner.

Start With Your Why

You must first understand the motivation behind your aim. We don’t share the same life goals. My aims aren’t your goals, and your goals aren’t mine.

We all have a cause for altering our daily routine. It could be because you want to buy a house, start saving/investing for your children, take a vacation that exceeds your budget, or simply get weary of lying and running into individuals you owe money to.

Knowing why you’re doing what you’re doing, whatever the circumstances, is a terrific approach to stay motivated.

Create And Stick To A Budget

Now that you know your “why” ​​pull out your notepad, gather your three most recent bank statements, and begin sorting your bills from essentials to non-essentials. A personal budget is the blueprint for your financial objectives; it can help you stay motivated by allowing you to watch where your money goes.

The coming months will be difficult because having a budget will force you to adjust many of your behaviors, such as canceling useless subscriptions, reducing your phone plan, and starting new ones, all of which will help you to save more money.

Reduce Your Spending

We all want to save money, but for the majority of us, it is a pipe dream that will never come true. However, by making a few lifestyle changes, you can meet your savings target.

The main problem for most people begins when it comes to stop spending money, and many give up in a short period of time. Don’t be one of those people.

You can go another month without using a streaming service if you can go a month without using one. To avoid getting cold feet, try splitting the cost of the items you think you can’t live without.

I understand that not everything, such as a gym subscription, can be shared. How often do you go to the gym each week? Is it really necessary to keep going when you can accomplish the same thing outside?

Deduct Your Interest Payments

If you can deduct interest payments on your federal and private student loans up to $2,5000 in interest paid from your taxable income, you can earn a tax credit from the government.

For example, if you are in the 22% tax rate, you’ll save around $550 on your tax bill which can later be applied to make extra payment toward your student loan balance. 

Since March 13, 2020, the government has put a temporary hold on most federal student loans due to the ongoing pandemic. Take a look at your student loan interest document to check if you still qualify. It’s available on the loan servicer’s website.

Enroll in Automatic Payments

Setting your finances on autopilot is something I really believe in. I used to sign up with the loan servicer for automatic payments. This choice has three major advantages: you will never be late on a payment, you will save money on interest, you will improve your credit score, and you will have peace of mind. I did, however, discover a faster way to pay it.

Now, instead of allowing the servicer to withdraw funds once a month, I sign up with my bank to have the payments sent out on my behalf – all banks offer this service. Because, instead of having that extra income sitting in your checking or savings account every year, you could have used it to make extra payments if you get paid weekly or bi-weekly.

For example, The minimum payment on your loan is $300, and you get paid bi-weekly. You’d set aside $150 every paycheck while making your budget, right? However, you will be paid three times in some months, resulting in an extra $150 in your account.

That $150 would have been extra payments toward your loan if the bank had submitted the auto-payments.

Know your Federal Loan Repayment Plan

It’s critical to comprehend your payment plan, as well as any alternative options available to you if you qualify.

Standard Repayment is the default plan, which requires you to make the same payment every month for ten years. Because the loan is paid off faster, this plan is the greatest option with the lowest interest rate.

Graduated Repayment begins at a low level and gradually grows every two years for a total of ten years. You’ll end up paying more interest than if you used the default plan.

Extended Repayment allows you to spread out your payment over a period of up to 25 years

Income-Driven takes into account how much money you make as well as how much money you owe. There’s a chance you’ll be eligible for loan forgiveness if you stay in that plan for more than 25 years.

Earn side income

Fortunately, we live in a country where there are no income restrictions. The more time you’re willing to devote to a side hustle, the faster you’ll be able to pay off your student debt.

Any extra money should be put towards your loan.

Use the COVID-19 Forbearance to your advantage

Now that the federal government has put a hold on student loans and is paying out stimulus cheques to individuals who are qualified due to the pandemic’s economic hardships, all interest rates have been set to 0% until January 31st, 2022. Any payments you make prior to the reinstatement of rates will be applied to the principal.

Public Service Loan Forgiveness

I can only imagine how wonderful it feels to get your loan forgiven, but I don’t know anyone who has. It does, however, happen according to educationdata.org. If you qualify, there’s a terrific program called Public Service Loan Forgiveness [PSLF] that can help you save a lot of money.

If you are a full-time teacher, a government employee, a military service member, or a law enforcement officer, you may be eligible to have the remaining balance of your account cleared if you have made ten years of on-time monthly payments.

For more information go to Student Loan Forgiveness

If You Are A Parent Consider Investing In A 529 or UTMA

Allowing your children to graduate debt-free is one of the most beneficial things you can do for them. There are various sorts of accounts that will allow you to save for your child’s college education, the most common of which is the 529 plan. It was developed with the sole objective of paying for your child’s, nephew, niece’s education. The UTMA, on the other hand, is more similar to a taxable account in which the recipient is taxed at the child’s rate.

Related: Why UTMA Over 529 Is The Way To Go

Final Thoughts

Because it is such a long procedure, we feel that student loan debt will follow you to your grave. It doesn’t have to be that way if you use the advice and methods listed above. You’ll be better off, 42.9 million Americans, and you’ll be able to move on to bigger and better things.

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