Americans owe over$1.53 trillion in student loan debt. Not only is it young adults straight out of school. There are also people who have been out of school for 10 or more years still in debt!
In fact, research suggests that it takes the average 4-year degree student over 20 years to pay off their student loans.
If you want to be debt-free sooner, read on. We will give you the top tips for how to pay off student loans fast.
Pay More Than the Minimum
One of the best tips for paying off student loans is to pay more than the minimum stated on your monthly bill.
If you only ever pay the minimum amount, you are only ever paying the interest.
So pay however much you can over the minimum amount. Even if that’s just $20 or $50 more each month. This helps you pay off student debt faster.
If you need some motivation to see how paying more can help, try a loan payoff calculator to figure out how much interest you’ll save!
Opt for Bi-Weekly Payments
Paying half of your payment amount every two weeks saves you a lot of interest. Over the course of a year, you will have saved a full extra payment in interest.
As most jobs pay bi-weekly, it can actually be easier to pay off student debt this way. Just take a portion of each payment and apply it to your student debt.
If you get paid weekly, even better! Weekly payments mean that you make three payments before the lender calculates interest. Over time, you save a lot of interest this way.
Trim Your Budget
If you are really serious about paying off student loans, you can consider taking a look at your budget.
Usually, you can find little ways to reduce your monthly spending. Maybe that means eating at home instead of eating out or canceling a monthly subscription you don’t need.
You may be surprised at how much money you can find by trimming your budget. Then, put all that extra toward your student loan each month and watch as the loan amount drops quickly.
Get a Side Hustle
One of the most effective ways for how to pay off student loans fast is to get a side income. It can be anything from driving for Uber, delivering pizzas, or starting a dog walking service.
Whatever you decide to do, commit to putting each cent from that job towards your student loans.
This is a sure-fire way to pay of your student loans fast because you aren’t tapping into your main source of income to make payments.
Double Check That Overpayments Go Towards Principal
In this article, we’ve talked about various ways that you can make additional payments onto your loan.
In order to really make a dent in paying off student loans, you may need to contact your lender. Some lenders have to be informed to use overpayments to go directly to the principal.
Sometimes, this is a given, but not always. Contact your lender to make sure.
Use the Snowball Method for Multiple Loans
If you have several student loans you might feel overwhelmed with multiple payments.
This is where the snowball method can help. Basically, the snowball method is a way to eliminate your loans one at a time.
You start by making the minimum payments on all your loans. You also put all your extra cash (from budget trimming, side hustles, etc) onto the smallest loan. Once you pay that loan off you put all the money you were putting towards it to the next smallest loan.
Soon you will have one loan left and will be making big dents in it each month.
Enroll in Autopay
Another way to lower your loan’s interest rate is to sign up for automatic payments.
Federal student loan servicers offer a quarter-point interest rate discount if you sign up for automatic deductions from your bank account. Many private lenders offer an auto-pay deduction as well.
Even if it’s not a huge drop in your interest rate, it does add up over the lifetime of the loan.
Use ‘Found’ Money for Loan Repayment
Anytime you come into some extra money such as a bonus, a cash gift, a tax return, or anything else, be sure to put at least some of that money toward your loans.
You may want to adopt the 50/30/20 breakdown. You will put 50% of the money to debt, then 30% to savings, and then 20% to spend for fun.
Remember, each time you put extra money onto your loan, you are paying down the principal.
Consider Refinancing Your Student Loans
The final tip for getting out of student debt is to refinance. This may be a good option for you if you have good credit and currently have high-interest rates or multiple loans.
Refinancing means consolidating all your student and credit card loans into one new loan. If you choose to do this, you may be able to get a lower interest rate.
Don’t forget that if you refinance your federal loans to a private lender, you lose access to federal programs like student loan forgiveness.
It may be a good option for you depending on what the new rate will be.
Now You Know How to Pay off Student Loans Fast
There you have it! Now you know how to pay off student loans fast. Even though it takes commitment and dedication, once your debts are paid, you will have the financial freedom you’ve dreamed of.
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