Collectively, we owe more than $1.7 trillion in student loan debt in the United States, according to the Federal Reserve. The $1.7 trillion in student debt is a 3% increase from 2020 and a far cry from the $905 billion that we owed just 11 years ago. Around 70% of college students graduate in debt.
Student loans are debilitating for many of us, holding back our wealth-building potential until we fully pay off all of that debt. “For most people who earn a college degree, student loans are just a fact of life,” writes Credible. It might be a fact of life, but those loans shouldn’t control your life.
7 ways to pay your student debt off sooner
There is no question that student debt is increasing at an alarming rate. If you are struggling to pay off those school loans, here are 7 ways to help you end your debt sooner.
1. Funnel bonuses and raises to your debt
It can be tough to use bonuses, raises or even tax refunds to pay down debt, but extra money can be a great way to pay down debts far quicker than just making our regular payments.
The next time you find yourself with a little extra cash, devote at least some of it to your student loans. Over time, funneling newfound money to your debts will help you reduce and eliminate your debts much faster. It’s usually smart to call your lender to make sure extra payments will be applied to your principal.
2. Refinance your student loans
Just as with a home mortgage, refinancing your student loans can help you reduce the amount of debt that you owe. Many working professionals refinance their student loans to reduce their interest rate.
Refinancing your student loans can save you anywhere from hundreds of dollars to thousands of dollars every year. Borrowers commonly choose to shorten repayment terms, which will increase the minimum monthly payment but drastically reduce the interest rate. Others will do the opposite and lengthen their repayment schedule by reducing their monthly payments.
Note that refinancing may require you to pay off a portion of the loan in the process. Also, a credit score of 650 or more and a high income will increase your chances of refinancing your student loans in a way that will save you money.
3. Pay more than just the minimum
Whenever you can, make payments that exceed the minimum amount required each month. Paying more than the minimum will help reduce the total amount of interest that you will pay (without refinancing) over the course of the loan and will also eliminate your student loans much sooner than just paying the minimum.
Just as with making extra payments after a raise, bonus or a side hustle, call your lender to ensure that extra payments will be applied to your principal rather than to your next month’s bill.
4. Apply for loan forgiveness
In certain circumstances, you may be eligible for student loan forgiveness. Student loan forgiveness can eliminate a portion (or all) of your student loans. But, you need to qualify based on your profession. For instance, teachers can often apply for student loan forgiveness along with those who work in public service.
Covid-19 related student loan forgiveness amounted to more than $15 billion.
5. Switch to biweekly payments
Instead of making single monthly payments, make biweekly payments (or payments every two weeks). Over the course of the year, you’ll end up making an extra payment every single year and you probably won’t even notice it.
Use automatic bank transfers to make this process easy and painless.
6. Autopay may help reduce your loan interest
Many student loan lenders will lower your interest rate if you enroll in autopay.
With autopay, a standard amount of money will be paid to your student loan balance automatically, usually monthly. This happens without you having to lift a finger, which also means you’re no longer responsible for manually paying back your student loans.
Automation is a very powerful way to make paying off debts easy. It’s a win-win.
7. Find out if your company offers student loan payback
Believe it or not, many companies around the United States will help pay off the student loans of their staff, including Aetna, Estee Lauder, and Fidelity Investments – among many others. Note that you may not get 100% of your loans paid back, but any help from your employer is better than getting no help at all.
If you don’t know if your company offers this perk, ask your boss or human resources department to see if student loan repayment is available to you.
Americans owe trillions of dollars in student loan debt. But, that doesn’t mean we need to spend the rest of our lives paying those debts off. Use these techniques to drastically reduce your loan’s interest rate or length.
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This article was produced and syndicated by Wealth of Geeks.
Featured Image Credit: Unsplash.
Steve Adcock is an early retiree who writes about mental toughness, financial independence and how to get the most out of your life and career. As a regular contributor to The Ladders, CBS MarketWatch and CNBC, Adcock maintains a rare and exclusive voice as a career expert, consistently offering actionable counseling to thousands of readers who want to level-up their lives, careers, and freedom. Adcock's main areas of coverage include money, personal finance, lifestyle, and digital nomad advice. Steve lives in a 100% off-grid solar home in the middle of the Arizona desert and writes on his own website at SteveAdcock.us.