If you’ve been to college (or ‘university’) then you either have been, or are going to be, in debt. That’s the first hurdle to get your mind over.
According to statistics from Make Lemonade, there are more than 44 million student borrowers. Collectively, they owe $1.5 trillion in student loans.
Now you could try waiting 30 years with it hanging over your head and the loan will go away. Or, you could wait until you die. Ideally, you could live abroad.
Even deferring won’t solve your problem, though. Unless you manage to find somewhere with a higher paying job and a lower cost of living. If you do, please tell us!
At the end of the day, your loan interest will keep growing. So it might be sensible to look at trying to wipe out the debt entirely. It pays to be informed, though. So check out our tips and hacks for repayng your student loans.
Pay More Than The Minimum
Let’s take an example:
- Let’s say that you have $50,000 of student loan debt and an 8% average interest rate
- If you can pay an extra $100 per month toward your student loans, you could pay off your student loans two years early. And save up to $5,000
You could also look at a one-off payment if you . Say that you’ve been working for a few years. You’ve gotten a promotion and you get a bonus to say thank-you from your comapny.
In this case, something like a $10,000 lump sump payment would save you $8.423. Plus, you’d pay off your student loan 30 months earlier overall!
Make sure, however, to instruct your repayment servicer. You’ll want them to apply overpayments to your current balance, and to keep next month’s due date as planned.
Pay Other Debts First
In the UK you’ll make repayments at 9% of your pre-tax earnings. But – and here’s the important bit – those repayments are only made on earnings that are above the threshold. Whilst paying off your primary is great if you can, think about other debts.
Always focus on paying off your highest interest rate debts first. On top of this, remember to budget. Remember the old ‘one coffee less a week’ motto that we keep getting fed! Budgeting is always important for overall financial indepenence.
This might mean saving at the same time and living within your means as well. Try to think about taking advantage of tax deductions and credits too. You’ll likely be eligible for the interest deduction on your federal taxes. Use this to your advantage.
Save Beforehand
If you can earn more from savings after tax than the loan is costing you, you might be better off keeping it in the bank.
You might not know but most of your repayments will just be paying off interest. However, paying your loans down before you graduate can help you pay them off even faster.
For most loans, the interest meter is running the whole time you’re in school. That’s then added to your loan balance. So any payments you can make while in school can help lessen interest and can save you money.
Make biweekly payments
This simple strategy is a way to trick yourself into paying extra on debt. Pay half of your payment every two weeks instead of making one full payment monthly.
You’ll end up making an extra payment each year. Plus, you’ll shave time off your repayment schedule. Most of all, it will be less of a stab in the heart. Seeing a lot come out at the end of the month always hurts more than a little every fornight
Run The Numbers
You could make extra payments, or even refinance your student loans. All of these options can be a little more than confusing, though. You want to look at your options and see what’s going to work for you.
In order to create an accurate repayment schedule, you need to understand your loan. Figure out how much you want to pay over what period.
Get started today with a handy tool like Saving for College’s pay as your earn repayment calculator.
Written by Harry Patté-Dobbs, a content writing and working as Pearl Lemon Leads as a PR newbie! You can usually find him either reading or writing. When I am not at home with my fam I enjoy long walks through the beautiful city of Jerusalem.
