5 Tips to Help Pay Back Student Loans

It’s graduation season, and the average student loan debt now exceeds $30,000. No wonder an estimated 11% of student loans are in default!

The Department of Education already expanded repayment options like pay-as-you-earn plans (PAYE) and income-based repayment plans (IBR) over the last few years, but many students are still struggling with this financial burden well into their post-college years.

In 2017, lawmakers introduced a new bill that could make a big difference for graduates – and their employers. This bill would extend tax benefits to employers who choose to help their workers with student debt.

Tips for Tackling Student Debt Responsibly

Money to pay back student loans would be great, right? Although the above program could be helpful if passed in the future, paying back the bulk of a student loan is ultimately the borrower’s responsibility. Paying off debt can be challenging, so here are a few tips for tackling student loans responsibly.

1. Pay more than the minimum and/or double up on payments.

Like most other bills, student loans are usually due once a month. Paying a little more than the minimum required amount can help you knock out the debt sooner (use a debt repayment calculator to find out exactly how much), and avoid paying extra interest. If you receive bi-weekly paychecks, you could also set up an additional automatic payment on paydays (even if it’s only a small amount).

2. Find your payoff date and use it as an incentive.

Knowing it will take you 10 years to pay off your student loans is discouraging, but every little bit of extra you pay into the loan will make freedom day a little bit closer. Create a visual update every time you achieve a new payoff date, and you’ll find more incentive to keep taking months and years off the end of it.

3. Use your tax refunds or education credits.

Did you get a tax refund or education credit this year? Instead of spending it, why not use the money to make a large payment on your student loans? The faster you can eliminate a monthly payment, the faster you’ll free up more of your budget year-round, rather than having to wait for your next refund check to have some “fun” money.

4. Take on a side job or apply your annual raise.

If you’re already working full-time, more work might not seem like the ideal situation. That’s why if you take on a side job to repay your student loans faster, choose something fun – and only do it a few hours or days a week. When this money is set aside exclusively for paying your student loans, it can quickly make a dent. Secondly, when you get your annual raise, apply the difference to your loans rather than inflating your lifestyle.

5. Consolidate and refinance – with caution.

Consolidating debt sometimes makes sense, especially if interest rates have dropped significantly. On the other hand, refinancing just to get lower payments while lengthening the duration of your loan – may only mean paying more interest in the long run.

Your personal finance habits will truly make the difference in getting out from under the burden of student loans, once and for all.

Read more about student loan repayment options in this article from bankrate.com.

Article Source: Jessica Sommerfield for moneyning.com

How to Pay Off Your Student Loans Faster

Stack of books isolated on white background.

No matter the circumstances, student loans really are not a fun part of adult life. Here are some pointers for getting rid of them faster:

Get motivated to pay them off sooner.

In reality, paying off student loans ahead of schedule will really just put you in a better financial state in the future. You’ll pay less interest over time and you won’t actually be stuck with the same student loan for 20 years like your term says you will. Find a really good reason that’s personal to you that drives you to pay them off faster. Imagine your life without student loans. Think of anything that will keep you strong in the student loan pay off game.

Pay more than the monthly minimum payment.

Whether it’s $20, $200 or any random amount in between, making a higher payment than required is the best way to pay off your student loans faster. If you have more than one loan payment, and can only afford to pay more on one loan, choose the one that has the highest interest rate.

Your student loan should already be included in your budget. You can budget for higher than your minimum payment, or you could use any money you have leftover at the end of the month as an extra loan payment. You can even implement both methods. Either way, paying more than required is a great way to pay student loans off faster.

Tip: Be aware of how extra payments are applied to your account. You want to make sure that the additional amount you are paying is applied to the principal amount rather than to interest.

Decrease your expenses.

Any extra money that can be put toward student loans will help you pay them off faster. “But, what if I don’t have extra money?” you ask. Take a look at your expenses and see if there is anything you can do to slash some. Ask your cable company about a cheaper package, cancel your monthly subscriptions to Netflix, Spotify, Amazon Prime, etc. Get a quote from other insurance companies or change your habits and eat out less often and make coffee at home.

Put birthday money, tax return funds, raises and any other extra cash toward your student loans.

If you receive money in addition to your normal paycheck, avoid spending it – no matter how much you want that new computer, those new shoes, or to go to that concert. It will be worth it as you get closer to paying off your student loans. Your future self will thank you!

Enroll in auto-pay.

When you enroll in auto-pay, your student loan payment is automatically taken from your account on the due date. Most lenders offer an interest rate decrease for people enrolled in this service. Not only does this eliminate the hassle of having to remember to manually make your payment, but it decreases the amount of interest you pay over time, allowing you to pay off your loans faster. Visit your lender’s website for information or contact them directly.

Avoid repayment programs and other repayment plans.

Although these programs come with a lower monthly payment, which always sounds amazing, they also come with longer terms, which means more interest paid over time. If you are really, really struggling to make those monthly payments on time and in full, these options might work for you. But, if you can make the payments, still pay your other bills and have money left over to enjoy yourself, don’t be fooled by the thought of a low payment.

Refinance or consolidate your loans.

Putting extra money toward your student loans is a sure way to pay them off early, but if you want to make an even more drastic change, look into your refinancing and consolidation options. You can possibly refinance your loans to get a lower interest rate and term length. If you have multiple student loans, you can consolidate them so they combine together, giving you only one loan payment.

Get a side job.

If your schedule allows it, a second job can help you reach your goals in paying off your student loans early. All money made with your second job can be put toward your student loans. While this may be easier said than done, it’s definitely helpful.

The sooner you get rid of that student loan payment, you’ll have more room in your monthly budget and more freedom with your finances – so get started as quickly as possible!

Article Source: Amanda Bridge for The Money Mill