November 16, 2020
By Rahul Iyer
Student loan debt can weigh you down and keep you from other financial milestones, including saving for retirement. If you’re tired of your high student loan balances, use these tips to tackle it fast.
1. Make extra payments
Like any loan, you have a minimum required payment. Pay it, of course, but if you can, pay more. You don’t have to pay the same ‘extra’ amount each month. If you have an extra $100 this month and $200 next month, pay what you can. Skip months if you have to, just always make the minimum required payment.
2. Make bi-weekly payments
This strategy doesn’t require ‘extra’ money. Split your payment in half and pay that amount every two weeks. Since there are 26 weeks in a year, you’ll make one extra (full) payment every year.
Combine this with tip #1 and you’ll get out of student loan debt even faster.
3. Sign up for automatic payments
Most student loan lenders give a discount if you sign up for automatic payments. You’ll save around 0.25% on average. It doesn’t sound like much, but every penny adds up, especially in interest. Just make sure your payment date coincides with your pay date so you always have enough funds.
4. Focus on one loan at a time
If you’re making extra payments or using any other strategy, focus on one loan at a time. It’s easy to get overwhelmed and try to pay every loan off faster. Instead, hyper-focus on one loan of choice. Choose the loan with the smallest balance or highest APR – whichever loan makes you lose sleep at night.
5. Use your windfalls
Every time you ‘come into money’ pay it toward your student loan debt. Think of things like tax refunds, monetary gifts, and work bonuses. Rather than spending the money pay it directly toward your student loans. Make sure when you do, that you mark it for principal only so it pays your balance down.
6. Refinance IF it makes sense
It doesn’t always make sense to refinance your student loans. First, if you have federal student loans exhaust all forgiveness options. Not everyone is eligible but if you are, refinancing would remove those benefits.
If you don’t have federal loans or aren’t eligible for forgiveness, see how refinancing would help you save money. Don’t look just at the monthly payment. That’s deceiving. Look at the loan’s total cost. Will you save money overall by refinancing?
Student loans don’t have to be a financial burden. Treat them like any other debt, finding ways to pay extra and get out of debt faster. With the right steps, you can pay your loans off faster than the typical 10-year term or worse yet, extending your term and dealing with student debt 20 or 30 years after you graduated.
Choose the steps that help you the most and that you can remain the most consistent with to see the greatest changes.