Ah, student loans. You can’t live with them and apparently you cannot live without them. It feels almost impossible to imagine a life without student loan debt and now in the midst of a health and racist pandemic, it’s another thing that is crippling my joyful spirit. The good news – paying off your debt doesn’t have to take forever. And if you have federal student loans, the CARES Act granted automatic forbearance until the end of September, with no accrued interest. If you have private student loans or just want to be free of debt, take a look at the below ways that could help bring your debt down.
Of course, depending on your financial situation, take this with a grain of salt. But paying more than your minimum is a great way to lower the interest you owe and a quick way for the balance to disappear. For example, if you owe $10,000 with a 4.5% interest rate over a 10 year repayment plan, paying an extra $100 every month, you’d be debt-free more than five years ahead of schedule. As a warning, student loan services are tricky, they might apply the extra amount to next month’s payment. This will advance your due date but not decrease your repayment plan, so make sure you instruct them to apply over-payments to your current balance versus next month.
Refinance the Loan
Refinancing your student loan could help you pay off the amount faster without making extra payments. Typically you’ll need a credit score in the high 600s, solid income and a history of on-time debt payments. Refinancing is great because you can push multiple student loans into a single private loan at a lower interest rate. You get to choose a new loan term that’s typically shorter than the original one you received. It could increase your monthly payment, but will help you pay the debt faster and save money on interest.
Make Biweekly payments
This is a little trick I like to do. By paying biweekly, the full payment doesn’t seem so alarming. Plus, you’ll end up making a couple of extra payments each year, shaving time off your repayment schedule. If this is interesting, here’s a great biweekly student loan payment calculator to see how much time and money you could save.
We’ve also compiled and broken down a list of financial jargon to help you understand your finances.