How to Pay Off Student Loans Fast?

Student loans can be a headache, especially when it is taking a bit too long to pay off. While making extra payments every month can be a sure way to pay off student loans faster, this is not the only way. Of course, paying more than the minimum every month means less interest and quicker clearance of the loan. However, combining several strategies makes paying off student loans faster and more sustainable.

Interests usually build whenever you are late on payments. By starting your payments early, you will not only pay off the loan faster but also reduce the overall cost of the loan. For instance, you could start payments while still in school to tame the interest. You could also start during your grace period to prevent early accumulation of interest.

When it comes to loan repayments, there are several plans available. Each will usually have its own benefits and drawbacks. However, reviewing each properly can help determine which works best for your financial goals and capabilities:

Standard Repayment Plan: With this plan, you are required to set up an amount that you will be paying every month. It is usually the default plan that students receive, allowing them to repay the loan in 10 years unless they choose a different plan.

Graduated Plan: As the name suggests, your monthly payment amounts increase every two years. Again, the plan allows you to repay your student loan within 10 years.

Extended Plan: For a more flexible plan, this option allows you to repay the loan over a period of 25 years, either as a fixed or graduated payment.

Income-Drive Plans: With these plans, the payment amounts change based on factors like annual income and family size. For instance, the Revised Pay-as-You-Earn plan allows you to make monthly loan payments of 10% of discretionary income. By the end of 20-25 years of making payments consistently, the remaining loan balance is forgiven.

The good thing with the payment plans is that you can switch between them at any time without any repercussions or penalties. However, if you to pay off your student loan faster, aim for a plan with a higher monthly payment. You will end up saving on the interest and completing the payments in a relatively lower timeframe.

Making extra payments or paying more than needed every month can help reduce the interest and total loan. However, there is usually a caveat that comes with prepayment. The student loan servicer will likely collect the bill and use the extra payment to advance the due date. In other words, they will apply the additional amount that you paid to next month’s payment. You can avoid this outcome by requiring your loan servicer to apply overpayments to the principal balance.

Setting an automatic debit arrangement with your loan servicer can reduce the interest rate on your student loan by 0.25%. At a specific time of the month, your loan servicer will automatically use your bank account balance to make your loan payment. This is particularly useful in making sure that you always make the payments on time and that you do not fail or skip any month.

Dedicating your tax refund to loan debt can help you pay it off faster than you would expect. While these may be funds you may not have planned for, dedicating it to paying off the student loan will be beneficial without feeling like you are losing something. In any case, the refund may be from your dedication to loan repayment. So, this is a good way of using the refund.

In certain situations, you may qualify for a student loan forgiveness plan. Although this may not be available to everyone, it can help to check your eligibility. Some of the members who are usually eligible for forgiveness and special payment plans include public servants, teachers, members of the US Armed Forces, and more. Even if you do not fit into any of the categories, you can check whether your employer has special repayment assistance programs for employees with student loans.

Everyone wants to pay their student loan fast, but the process is often more complicated than expected. While there are many variables involved, the trick lies in making the payments consistently, starting early, and paying more than the minimum whenever possible. Taking advantage of programs such as auto debit can also help to pay off the debt faster.