When you graduate, you’re so excited to start really living your life and going into the world of work, and then you begin to realise that the next few decade(s) are going to be spent paying off that degree. As daunting as paying off those loans sounds, there are ways to lighten off the load a bit.
In this post, I’m sharing with you 7 strategies you can use to pay off your student loans faster.
7 Strategies to Pay Off Student Loans Faster
Get Yourself on a Budget
I just can’t stress enough the importance of having a budget for your money. If you don’t know where your money is going – or even more importantly, control where your money is going – then you will have a hard time consistently making progress with your financial goals.
Budgeting won’t sound fun, but I promise you it’s life-changing once you incorporate it into your daily life. I’ve summed up a few budgeting resources to help you get started:
- Creating a Monthly Budget: A Step-by-Step Guide
- How to Budget with an Irregular Income
- How to Use a Zero-Based Budget to Reach Your Goals
Avoid Low Repayment Plans
I know that the idea of getting on an income-based repayment plan can sound appealing, especially when you’re just getting started with your career. If your lender would want to lower your student loan payment, why wouldn’t you let them?
And whilst these payment plans can be helpful for getting you on your feet or helping you out when you’re going through a financial trouble, they aren’t going to help get your loans paid off any faster. At the end of the day, the more money you put towards your student loans the faster you’ll get them paid off.
A standard repayment plan is designed to have your loans fully repaid in ten years. And those income-based plans? They can take up twice as long before you become debt-free.
I do understand there are some situations you can’t avoid, these income-based repayment plans are unavoidable. I’ve been a low-income worker straight out of college, and the income-based plan was all I could afford. But increasing those payments when you can ensure you aren’t stuck in student loan debt for years longer than is necessary.
Pay More Than the Minimum Payment
The only way you’re going to get your student loans paid off as fast as you want is if you make more than the minimum payment required every month. This is where your budget comes in!
If you don’t think you have the money to pay more than the minimum payment, go through your budget. Is there a category where you could be spending less? Could you instead put that money towards extra payments towards your student loans?
I do want to preface this by saying that if you have other debts such as auto loans, credit cards or personal loans, you should prioritize those over your student loans. Federal student loans have notoriously low interest rates compared to other debts, meaning you’ll have money in the long run to tackle other debts first.
Start a Side Hustle
If you’re working a full-time job for someone else, you’re probably working with a certain amount of money each month. And outside of getting a raise, there isn’t really many ways for you to increase your income at work. What you can do, however, is start a side hustle. And more and more people are doing just that.
Starting a side hustle was one of the best moves I made to speed up my debt-free journey. First, it allowed me to increase my income and have extra money to put toward my student loans every month.
But the long-term impact was even more incredible. I was able to take use my small personal finance blog as a launchpad for a freelance writing business that allowed me to eventually quit my full-time government job and take my business full-time, more than tripling my income. Since then, I’ve been able to pay off even more debt save for major financial goals.
And remember, increasing your income doesn’t have to mean starting a business the options really are endless, and that extra income can literally be life changing.
Use Cash Windfalls for Extra Payments
I know how tempting it can be to get your big tax refund or a bonus at work and dream about the ways you could spend that money. I know a vacation probably comes to mind for me! But really, using those windfalls to make extra payments on your student loans can go a long way towards getting your debt paid off.
Common windfalls include work bonuses, tax refunds and gifts. Additionally, workers who are paid every two weeks will receive two months per year where they’ll get three pay checks instead of two, which is a large lump sum you can put towards your student loans.
You could seriously pay your loans off years earlier by using those windfalls as extra payments. I know it’s not the fun choice, but you’ll make a lot of extra money down the road to have fun with!
Consider Refinancing Your Loans
Depending on when you borrowed your student loans and who you borrowed them from, you may be stuck with a high-interest rate. Refinancing your student loans can be a good way to lower your rate.
There are multiple of companies out there these days who are helping graduates to significantly lower their student loan interest rates to get those loans paid off faster and for way less money.
Are you considering refinancing your student loans? Visit Credible to see interest rates that are available from several student loan refinancing companies in one place.
Note: I would be very cautious about refinancing federal student loans. Those loans come with certain perks not available to private loans, including the two-year forbearance and 0% interest rate available for federal loans during the pandemic.
Final Thoughts
You’re not the only one who’s freaked out about paying off their student loans.! Just be happy there are strategies that we can use to pay them off faster.
