How to pay off student loans fast
Who wants to spend the rest of their lives paying off their loans from post-secondary? Nobody. The weight of paying off student loans can be a heavy burden. This could be the year that you finish repaying your student loans or get yourself into a better habit of repaying them faster. The question is, how can you make that happen?
Here are 5 ways to pay off your student loans faster:
Pay More Than The Minimum
Even though this sounds like the last thing you want to do, it’s a great step towards repaying your student debt faster. Some student loans have no prepayment penalties, specifically federal student loans, so you can pay them off any time.
Now, why would you pay more than you absolutely have to? Interest, my friends. Interest is constantly accruing on your principal balance. Therefore, by paying more on your monthly payments, you can reduce the cost of your debt on those student loans.
Before you choose this option, read more about the pros and cons of increasing your student loan payments here.
Consolidate and Refinance
Do you have a steady income and good credit? Perhaps consolidating or refinancing your student loans is the way to go. The goal of refinancing or consolidating loans is to decrease interest rates and/or increase your term length.
Rather than suffering from multiple debts to repay — if you have federal student loans — you can consolidate these debts into one. If you’re not sure whether or not this option is right for you, read what Federal Student Aid has to say about this option.
If you have private student loans, then refinancing may be the better approach. Refinancing involves taking out a new loan in order to pay off an older one. Basically, this allows you to pay off the old loan much faster and save money on interest. You may also end up with a lower interest rate, so more of your money will be used to pay off the remaining balance quickly.
Apply For Student Loan Forgiveness
If you have federal student loans, are enrolled in a federal repayment plan, and have made 120 eligible on-time payments — you may qualify for student loan forgiveness. Especially if you have a full-time job in an eligible state, federal or local public service job or a non-profit job. So, consider accepting a job that can grant you access to student loan forgiveness!
When you are paying back federal student loans, you can enroll in income-driven repayment programs that may allow you to receive student loan forgiveness. For more information on student loan forgiveness, read How To Get Your Student Loans Forgiven.
Find Your Payoff Date
Not sure when your payoff date is? That’s okay, you’re not alone. However, learning when you’re likely to finish paying off your debt can give you an idea of why you should pay it off faster. This little piece of information is key for helping you manage debt and work towards moving that date up.
To make this easier on yourself, review all of your student loans (both federal and private) and make a list of what you owe where. Then, confirm dates with your loan providers and confirm that there are no penalties for prepaying, so you can get started ASAP.
Student Loan Interest Deduction
If you are lucky, you may be eligible to deduct the student loan interest you paid with your federal student loans… on your federal income taxes (Federal Student Aid). This deduction is capped at $2,500 every year. However, this tax deduction provides the unique opportunity to lower your overall income tax bill. This deduction is possible whether you choose to itemize your deductions on that federal income tax return or simply use a standard deduction. The key is to focus on the amount of interest you paid, not your student loan payments as a whole. Request Form 1098-E from your student loan servicer and review the requirements.
Paying off student debt doesn’t have to take a never-ending amount of years. A great way to take advantage of lowered interest rates is to explore refinancing. Click here to find out about your refinancing options.
If you’re worried about making the wrong decisions when it comes to repaying student loans, read Biggest Student Loan Repayment Mistakes for information on what you should avoid doing.