Student loan debt has become a normal part of attending college. The graph below depicts how the cost of higher education has been escalating sharply over the last few years. An astonishing fact is that colleges claim to teach you everything but fail to teach you how to pay for the college itself. If you are thinking of student loans as the solution then yes, you are headed in the right direction. However, student loans can eat up a big portion of your paycheck before it even has the chance to hit your bank account. Many students do not even realise that it may take them decades to repay the loans. But, that won’t be the case if you stay vigilant about your finances. If you thought there couldn’t be an easy way out of the clutches of student loans then here me out. I have listed some of the best ways to pay off student loans that will help you escape the college debt soon.
Source: Medium
This article is easy to understand and it explains all the financial nitty-gritty in the simplest manner possible. Read till the end to decide the best way for yourself.
Top 14 Best Ways To Pay Off Student Loans
The best way to pay off student loans is to pay more than the allotted minimum each month. The more you pay toward your loans, the less interest you’ll owe and the quicker your balance will disappear. Here are some really creative ways that will help you to deploy this mechanism directly or indirectly.
Make It A Rule To Pay More Than The Minimum Payment
Effectiveness: Medium
Perhaps the most obvious one. It is probably also the most effective, easiest and best way to pay off student loans and get rid of them fast. Every bit over the minimum payment, whether it’s paying $5 or $30 more each month, helps to really make a dent in your debt. Just ensure that when you make extra payments, you select the option for the funds to be applied towards your loan principal.
Avoid Certain Repayment Plans
Effectiveness: Depends
Sorry to break this to you late in case you have already accepted a loan agreement, but for those who have not yet procured a loan, there’s some advice for you. Do not go for repayment plans that lengthen your loan term. They seem to lower your monthly payments but trap you for a considerable amount of time. You may also end up paying more interest overall, particularly if you don’t qualify for loan forgiveness. Trust me, you don’t want to take a loan out at 18 and end up repaying that until the age of 45. So, if you’re truly trying to pay off your student loans faster, avoid repayment programs that extend your payment terms.
Also Read: Financial Advice For University Students
Refinance If You Have A Good Credit And Steady Job
Effectiveness: High
Many people have heard the term ‘refinancing’ but they do not know its exact meaning. Let me help you out. Refinancing means that you take out another loan to repay your first loan. Don’t worry this doesn’t mean you have to repay two loans. Actually, this is a smart way. What you are technically doing is hunting for a reduced interest rate or shorter period from another provider. Once you find that, you clear off your first loan and now you just have to pay the reduced loan. If you had two or more loans previously then you can merge them together in your refinance plan. Keep in mind that while refinancing federal loans with a private lender will cause you to lose some federal benefits but irrespective of that this is one of the best ways to pay off student loans.
Enrol In An Autopay
Effectiveness: Medium
If you don’t want to refinance your loans then signing up for an autopay would be the next best way to pay off student loans for you. Federal student loan servicers offer a quarter-point interest rate discount if you allow them to automatically deduct payments from your bank account. There are several private lenders as well who offer an auto-pay deduction. This way has more or less the same perks as refinancing.
Start Earning Early With A Part-Time Job In College
Effectiveness: Low
Having a part-time job while attending college is another great way to keep college debt in check. Primarily because you can use those earnings to get a head start on paying down your balance.
Read More: A Student’s Guide To Finding A Job While At Uni
Start A Side Hustle
Effectiveness: Depends
If working for someone isn’t something you enjoy then you can always let the entrepreneur in you spread its wings. Start something that provides you with a side income. You could then use this income to get rid of the student loan. A side gig can also involve selling unwanted things on eBay, Amazon, etc.
These were some of the brilliant best ways to pay off student loans that deserved a detailed description. Apart from these ways, there are a few other ways as well which are pretty common. Let’s have a look at them.
- Consolidate On A Federal Loan – If you have multiple private loans then do consider merging them into one loan to save money.
- Get On A Budget – Save as much as you can by staying on a tight budget.
- Use Found Money – As and when you receive unexpected money, keep depositing them to clear your loans. A festival bonus or raise could be classified as ‘found money’.
- Make Biweekly Payments – Deceiving yourself can sometimes work in your favour. Instead of making the minimum payment at the end of the month try doing the same every fortnight. If you can manage this then your period will be reduced to half directly.
- Take Advantage of Tax Deductions And Credits– There are various schemes rolling out from time to time for students. Stay vigilant and see if you could use any of them to your benefit. Again, this is one of the best ways to pay off student loans early.
- Pay Off Capitalised Interest – Capitalised interest is interest that isn’t paid off. This interest adds to your balance which causes you to pay more on your student loans overall. So pay off capitalised interest as soon as possible.
- Apply For Loan Forgiveness – Forgiveness programs can eliminate part of your student loan debt straight away.
- Apply For Income-Based Repayment – If you are already working then you should ask your employer for any schemes they may have to rescue their employees from the cyclone of student loans.
Lastly, stay motivated and you’ll beat this student loan debt very soon. Good luck!
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