If you are a college graduate, chances are you have at least some student debt. According to a report from the Wall Street Journal, the average grad is about $29,000 in debt, with that number soaring even higher for those who have pursued graduate or professional studies. The good news is that with some resourcefulness, planning, and creativity, there are ways to pay off your student loans more quickly and save yourself thousands of dollars in interest.
1. Pay More Than the Minimum
Even if you can only afford an extra $20 a month, throwing extra funds at the principal of your loans is a good way to shave months or even years off your payoff date. Make sure though that additional payments are applied to the principal, not to interest.
2. Check into Income Based Repayment Plans
If you have federal student loans, you may be eligible for a program that allows you to pay just 15 percent of your discretionary income for 25 years. After that period, if you’ve made payments faithfully, the remaining balance is canceled.
3. Make Biweekly Payments
According to Investopedia, this strategy is well-known in the mortgage industry, but is rarely applied for student loans. By paying half the amount of your payment every other week, you’ll make several extra payments each year.
4. Stick to Your Budget
If you’re committed to paying your loans off quickly, you may need to make sacrifices. Consider cutting cable, shopping the clearance rack, and bringing lunch to work instead of eating out, then throw that extra money toward your student loan principle each month.
5. Create a Plan
If you don’t have a clear handle on your student loan debt, it can seem insurmountable. Make sure you know exactly how your loan works, what your interest rate is, and when it will be paid off. Then develop a plan to pay it off sooner with one or more of the strategies above,and recalculate the loan’s new end date. Seeing the payoff date move closer can help motivate you to pay off the loan quickly.
Student loans are a lifelong commitment for many, but they don’t have to be. While it makes sense to pay your student loans off as soon as possible in most cases, if you have credit card or other types of debt, the best strategy is to pay off the highest interest loan first.