Graduating with flying colors and being debt free is every student's dream. And we can only imagine how ‘taxing’ this whole process can be. So let us help you out here. We have listed down 10 smart tips for student loan repayment you can try so that your 30s are spent unbothered by debt.
Student loan payoff tips
Now that we have confirmed that student loan repayment is a burden, it’s time to dive into the various ways to get through it.
Have a game plan ready!
Understand the whole student loan repayment, including the tax advantages and principles. Before making the decision to repay, be aware of the financial value of each component and take time out to make a timetable. This plan should not be more than five years and not so low as to make it impossible to achieve and ultimately cause the strategy to fail. A suitable time span could be between two and four years, requiring you to determine how much you want to pay each month.
Pay more than the monthly minimum, the right way
It for sure is a difficult task to repay and do student loan management. Often, our first paycheck is insufficient to cover this cost. But a silver lining you shouldn’t ignore is that you might not be required to make loan payments while in school and for a short while after you graduate because your loans are deferral. But unfortunately, aside from Subsidized Direct Loans, interest continues to accrue during this period.
Make biweekly payments
A majority number of students just make one monthly loan payment. But if you make bi-weekly payments, you will, however, end up paying more over the year and will eventually reduce your payment period.
Here's how it would work! Say, for example, you do the monthly student loan repayment in two equal instalments every two weeks. A half-payment every two weeks would result in 26 payments throughout the year. This equates to 13 total payments each year and only making 12 payments over the course of the year if you pay once per month. You could reduce your interest payments and pay off your debt much sooner by making bi-weekly payments.
Reconsider Your Repayment Plan
Changing to a shorter repayment period will help you pay off student loans more quickly. The monthly cost will typically be greater for shorter repayment terms, so you must make sure you can afford the new amount before switching.
Federal loan borrowers can choose from many different student loan repayment options. For more information on the plan, you are currently enrolled in, log into your Federal Student Aid (FSA) account. The 10-year standard or graduated repayment schedule is the shortest period available, so you can adjust your payback schedule if you are not enrolled in any of those plans and are not working toward loan forgiveness. To make things easier, it is possible to see how your student loan repayments would change for each plan using the official FSA loan simulator.
Put your windfalls to use!
Consider directing your windfalls toward your student debts if swiftly getting out of debt is your main objective. A windfall is any financial gain that you weren't anticipating. Unexpected cash such as tax returns, inheritances, and bonus pay are a few examples of windfalls.
Determine how much of a windfall you will put toward your debt. Your other objectives or expenses will further influence the amount you select. You also need to prioritize taking care of immediate needs before considering adding to your emergency fund. Save on your student maintenance loan by using this windfall to your benefit.
Sign up for automatic payments
Federal student loan servicers may lower your interest rate by .25 percentage points if you set up autopay. Many private lending providers also offer a comparable discount. This may not seem like much, but even a slight decrease in your interest rate might make it simpler for you to pay down more principal and pay off your debts earlier. Even a slight rise in interest rates could significantly impact your debt if you owe a lot of money. For instance, this method could be helpful if you're attempting to find out how to pay off $100,000 in student loans quickly.
Research Refinancing Options for student debts
If you have high-interest student loans, refinancing can help you pay them off more quickly. You can find a new lender with better conditions or a cheaper interest rate by refinancing your student loans. To determine how much refinancing could save you, use a refinancing calculator.
Consider a $40,000 loan with a 7% interest rate and a 10-year duration. You must pay $465 each month. Your new monthly payment will be around $545 if you refinance to a 7-year term and a 4% interest rate, an increase of $80. This way, you'll save a whopping $9,800 in interest and pay off your loans three years earlier.
Refinancing has drawbacks, especially if you have federal loans as refinanced loans turn into private loans and lose all of their advantages, such as income-driven repayment plans, extended forbearance and deferment periods, and loan forgiveness programmes.
The government has also stopped collecting on federal student loan repayments and frozen interest rates since the Covid-19 outbreak started. The same clause does not cover private loans. You could refinance the private loans to a lower interest rate while keeping the federal loans in place if you have a combination of federal and private loans. You might get the best of both worlds with this.
Support of family and friends
Consider asking your friends and relatives for assistance with loan repayment if you feel comfortable doing so. In place of holiday gifts, for instance, you could always ask if they might be okay to offer you money toward your student loan repayment.
Seek loan repayment assistance
A growing number of employers offer student loan repayment assistance. If you're looking for options for how to pay off your student loans fast, it may be wise to consider this in your job search. If you can find an employer that gives you money towards your student loan repayment, this extra cash can help pay down your principal balance more quickly so you can become debt-free ASAP.
Pay off the high interest loan first
If you have several loans, concentrate your extra payments initially on the ones with the highest interest rates. This will enable you to pay off your more costly debt as soon as possible, making it less expensive to repay what you owe. That might make it simpler to pay off debt more quickly.
A great career is built on a foundation of education. However, studying at prestigious universities around the world may be expensive, which is why education loans are so important. Therefore, to make the process as smooth as possible, you must be prepared to make decisions about your student loan repayment by understanding the various risks and ramifications associated with these eventualities. Remember that, no matter what you do, it's always best to be proactive and aim to reach an agreement rather than allowing your debts to become late - or worse, default. You can always have a thorough plan from applying for student loans to the selection of student loan providers for a smooth repayment experience.We wish you the best of luck for your future endeavours!