If you took out student loans for your higher education you only have a 6-month grace period at most to start paying them back. Therefore, you need to have a strategy on how to pay off your student loans even before you graduate.
Remember that you will have to make the minimum payments monthly even if you don’t have a job. If not, the loan will be in default and that is a whole issue on its own.
However, there are a few strategies that can help you to pay off your student loans. Keep on reading to get helpful tips on how to pay off student loans:
How To Pay Off Student Loans
Make Extra Payments
If you want to be done with student loans make sure you are paying more than the minimum every month.
Paying off the loan fast means the interest will be minimal. You won’t be penalized for paying more than the minimum amount. The additional payments can be made at any point in the month.
Also, you can pay a larger amount on the due date. However, make sure you have communicated this to your student loan servicer that the overpayment should be applied to your current balance and not the next month’s payments.
Set Up An Autopay For The Loan
You can drastically lower the interest rate on your student loans by signing up for autopay. You can have your interest rate go down by a quarter-point if you sign up for autopay.
Also, private lenders offer an auto-pay deduction too. Even though this may not seem like a big deal. You will have saved on the interest which can be thousands of dollars.
The extra money can help you clear the debt fast so that you can move on to more important investments or even planning your finances.
This is a simple method you can use to trick yourself into paying off your student loan fast. Instead of making one payment per month, you can be paying half of the amount biweekly.
Each year you will make extra payment which reduces your student loan further not to mention the interest you will avoid.
There are biweekly student loan payment calculators that can help you determine how much you can save in the process.
Refinance The Student Loan
You can pay off your student loans faster if you refinance. However, this is only possible for people with a steady job and good credit.
Anyone with a credit score of more than 600, good debt repayment history, and a solid income can qualify for this. However, if you are using federal loan benefits refinancing may not be an option.
In refinancing, multiple student loans are consolidated into a single private loan which attracts a lower interest rate. Also, you can pick a shorter repayment term than previously agreed. However, this will increase your monthly payments. You should also note that this will have you clear the debt faster.
Pay Off Capitalized Interest
Unless you took federal government-subsidized student loans, the interest will continue to accrue while you are in school. This is the same case during your grace period and even in periods of deferment and forbearance.
Interest capitalizes the moment repayment begins. Thus, as the balance grows the interest amount also goes up.
During the grace period, you can pay off the accrued interest to bring down the balance. It may not speed up the repayment period immediately but you will have brought down the balance so that you won’t end up paying much in terms of interest.
Another option would be making a lump-sum interest payment prior to the grace period. You can even postpone the payment. It is a great option when you are looking for ideas on how to pay off student loans.
Have A Standard Repayment Plan
Any federal student loan you have will be put on a 10-year repayment timeline.
However, you can go for a different repayment period. If it’s not possible to make big extra payments a standard repayment plan can help you clear the debt fast.
There are income-driven repayment plans for federal loans that you can extend for 20-25 years.
The federal student loans can also be consolidated so that they are paid in 30 years. Just because there are options it doesn’t mean you have to stick to them.
Choose a standard repayment plan that will help you clear the student loans fast.
How can I pay off my student loans faster?
Some of the methods include; paying more than the minimum payment, make an extra sudden loan, make a lump-sum payment, apply for student loan forgiveness and take student loan deduction.
Is it smart to pay off student loans quickly?
Definitely yes, but this is if you have a solid financial foundation.
Can you pay off student loans in full?
There are no prepayment penalties on federal student loans or private student loans. You can make extra payments on your student loans or pay them off in-full without paying a fee or other penalty.