How To Pay Off Student Loans – 4 Quick Tips
- March 21, 2020
- 3 min read
- 34 reads
Are you coming to the end of college? Want to pay off your student loans fast?
Most graduates leave college in high hopes that their newly acquired, “big boy” job will pay off their student loans fast. They think this new role will provide enough money for the life they dreamed that education would give them.
This brand-new income will magically pay off all their student loan debt and save a house deposit for their dream home within a few years. However, student debt is heavily impacting future opportunities for college graduates.
Millennials are hoping that their financial opportunities from their college education will outweigh their hefty student loans.
The average cumulative student debt for a four-year degree was $26,900 for a public school and $32,600 for a graduate of a private school.
Federal student loan interest rates for undergraduate degrees are starting at 4.53%, with postgraduate interest rates increasing to 7.08%. If those interest rates aren’t shocking enough, there are also the loan fees attached to each student loan ranging from 1.059% through to 4.236% for postgraduate studies.
Interest rates have reduced since 2006, where interest rates were over 6% for an undergraduate student loan. Once you have a student loan, the interest rate won’t change. It is locked into the interest rate at the time you acquired the loan.
Over 70% of all college students graduate with a student. Although it is the norm to have student debt hanging over your freshly graduated head, it doesn’t have to be that way for long.
It is possible to pay off student debt and move into a more financially independent future. Still, it’s going to take some planning and budgeting to get there.
If you are serious about knocking down your student loan, we have some actionable solutions that will get you there.
4 Ways to pay off student loans
1. Keep Living Like A Student
Most people live within their means. When their means increase, they increase their lifestyle to accommodate the newfound income. As a student, you don’t earn much money. You are careful with what you spend and don’t buy many wants.
One way to knock your student loan debt down quickly is to continue to live like you earn the same money you did as a student. Put all your extra income directly into paying off your student loan.
This is not a long term solution, but it can reduce your debt load quickly.
2. Increase Your Payment Amount
If you graduated with a loan of $32,600 and you wanted to pay it off in 10 years, then it will cost you $330 per month, and you will pay over $7800 in interest alone. That is if you don’t fault any payments within ten years.
If you increase your monthly repayments to $600, you will pay off your loan within five years, saving you over $4000 in interest payments. Pay as much as you can off every paycheck.
3. Consolidating Your Loans
If you have multiple loans from private lenders, chances are you could be paying excessively high interest. One way to reduce the amount of interest you pay on your student loan is to refinance your loans through a consolidation lender.
Loan consolidation doesn’t always help you pay the loans off any faster, but it does create a clear and concise path for your debt repayment.
If you have a federal loan, your interest rates are probably as reasonable as they are going to get, and consolidation wouldn’t be a good move.
Refinancing through consolidation is an excellent option if you have loans from private lenders. Our personal loan calculator helps you compare multiple lenders at once, connecting you to the right company in seconds. Let us do the research for you.
Compare personal loan rates here
4. Increase Your Income
Get a side hustle, one of the best ways to pay off student loans is to increase your income. Working one night extra per week could take years off your student loan payments.
Get creative with what services you have to offer. It could be anything from tutoring through to working a second job. You won’t have to do it forever, but it will help when you need money now.
If you have any tips or suggestions on ways you have paid off your student loan fast comment below.