How to Pay off Student Loans Fast?
[5 min read] Curious about how to pay back your Student Loans? Read this Qilo News article to figure out how to Pay off Student Loans Fast!
Student loans are a hot topic and for good reason.
Not only are these financial burdens holding back thousands of graduates from regular life milestones, but also they present a real challenge in the coming decades for other industries that rely upon this economic progression being stymied.
As you can imagine, tips, tricks, and general advice on how to conquer these financial demons as quickly as possible is quite common, yet not all of it is useful.
We’ve scoured the Internet to find out what works - and, more importantly, what doesn’t - in order to collate a list of ten proven strategies that will help borrowers pay off student loans fast.
Whether used in combination with one another or as part of an overall financial strategy, we know that these methods work.
We’ll explain how they work, why you might want to consider them, and what to do to move forward.
Here are our top ten fastest ways to pay off your student loans:
- Pay More Than Required
This strategy might seem like common sense, but it is also a lot harder to accomplish than meets the eye. That’s because most buyers are simply lucky enough to meet their minimum payments, let alone paying more.
One common piece of advice to help you with this is to make a pledge to direct any surplus money you receive towards your student loan repayment. Think of any monetary gifts you receive, tax refunds, or whatever it might be but you should take that amount and direct it towards making more than the minimum required payment on your loans.
- Carefully Evaluate Your Repayment Plan
A common pitfall that many borrowers never realize is that their repayment plan is actually holding them back from paying off their loans as quickly as possible. Whether you started repayment with a lower income or you have opted for multiple deferments, be careful when you agree to a change in repayment terms or ask for deferrals and forbearance.
At a minimum, you want to make sure to cover more than the interest charges your loans accrue each month. If your payment is frighteningly close to that number then you are likely not paying enough. Remember: In order to retire your debt, you must tackle the principle, not just the interest payments.
- Tax Deductions and Tax Credits
Another bit of the art and science of paying back student loans that gives you great benefits if you just sit down and figure them out are tax deductions and tax credits offered by federal, state, and sometimes even local governments.
For those of us with lower incomes, we will typically benefit from this without much extra leg work, but, for those of us with higher incomes, there might be an optimal amount to repay, each year, in order to most efficiently utilize the tax law to your advantage. That is, there is a number that is higher than what you’re required to pay that will actually help you save money on your taxes and, in return, free up more money to pay on student loans.
Naturally, this is why we said you have to do some research and leg work to figure it out. You can pay beyond what will give you a tax credit, but it might not be in your best interest to do so. Figuring out what the optimal repayment amount is given you income and tax situation might require some extra work, but it is definitely worth it to be able to take advantage of this situation.
- Look for Payment Matching Programs at Work
Some employers offer student loan repayment matching programs where they will help you pay off your debts. Getting this kind of help not only makes the process faster, but it also makes it much easier on you financially. The details of programs differ from employer to employer but, at its core, the idea is that a certain percentage is matched or a flat dollar rate is paid as a subsidy to help you during the loan repayment process.
There are even federal and state programs to encourage employers to do this. If you think your employer has a program, or are wondering how to get started, you should consult with your manager or human resources officer at your place of employment.
Several loan servicers offer you discounts on your student loan payments in the forms of lowered interest or rebates if you agree to have your monthly payment auto-debited from your checking account. The amount, again, varies depending on your servicer but, if you plan on paying your loans off for a decade or more, this discount can add up to some serious money in terms of savings. Remember, when you speak of savings with regards to your student loans you are talking about actual money going back into your pocket that you can use to pay off your loans more quickly.
This is another nuanced piece of advice that depends upon your financial situation. In its simplest form, refinancing can consolidate your debts at a lower interest rate. That will save you huge amounts of money, of course, but there’s a catch. Some refinancing options strip away your rights of forbearance and deferment.
They also might remove your loans from the federal system entirely. That means any benefits that accrue to student loan borrowers might not come your way. Then again, refinancing might be your best bet if you plan on tackling the debt head-on and in a short amount of time. Why? Because you need to get maximum financial benefits in the shortest amount of time whereas you don’t have this pressure if you do not refinance.
- A Second Job/Side Job
There are two major ways to increase the amount of money you have to spend on student loan payments: Make more money and spend less money. We’ll talk about the second option later, but the first option is more within your reach than you might imagine. Consider a second job, freelancing, or some other kind of side gig. You can make some serious money and direct all of that excess towards getting rid of your student loan debt sooner rather than later.
- Extra Payments
A simple strategy that doesn’t require a lot of thought but might necessitate some budgeting on your part is to make extra payments throughout the year. You could double up, triple up, or pay half of next month’s debt alongside the full amount for this month. However you decide to do it, you will be retiring the debt that much more quickly.
One of the most common strategies is to double up your payments, but, if you want something more sophisticated, we’ve got two expert strategies on this list that will help you make the most out of this piece of advice.
- Cut Your Spending
We all spend more than we should, the secret is to find out where, eliminate it, and put that savings towards something more productive. What we love about this strategy is that it becomes a life strategy, not just a student debt remedy. Once you recognize how much money you waste, and all of the better ways you could spend that money, there’s no going back. We suggest looking at luxuries and recurrent services. Think about purchases that are based around habits as well as those that reoccur every month.
If you don’t watch Netflix, get rid of that subscription. If you find yourself eating out all of the time, buy groceries and learn how to cook at home. When you start to look, you’ll notice that there are a myriad of ways you are wasting money every month - and all of that could be going to your student loans instead.
- Debt Snowball/Debt Avalanche Methods
We have saved our number one strategy for the first spot and that’s because it is a tried-and-true method for debts of any kind. There are two very popular strategies that utilize similar principles yet take them in different directions entirely. There is the debt snowball method. How does this work? You take your smallest debt and work towards paying it off as quickly as possible while making minimum payments on your other debts.
As you pay off your smaller debts you begin moving up to your larger debts; hence, the term “snowball” because the balance you are tackling is going up as the debt snowball rolls downhill. Eventually, you end up with your largest debt, and your only debt, remaining. You can then focus all of your energy on retiring that amount using your accumulated savings and strategies to this point.
The second method is the debt avalanche method. This one focuses on the interest rates attached to your debts. You start with the loan with the highest interest rate and double up on payments on that (or whatever strategy you choose) while doing minimum payments on your other debts. How does this save you money? By eliminating the highest interest rate debts first you save money as your debt repayment program progresses.
As for which works best for you, that’s largely a matter of math and idiosyncratic consideration. But it’s also a matter of preference. One overriding need of all of these strategies is consistency or the ability to stick to a plan and faithfully pay back your debts. Never forget that.