How to Get Rid of Student Loans Quickly
Use a student loan payoff calculator to see how quickly you can pay off your loans and how much money you’ll save on interest, try CitrusNorth for free today. Here are seven tips to help you pay off your student loans even more quickly.
Make extra payments appropriately.
There are never any penalties for paying off student loans early or above the minimum payment.
However, there is a catch when it comes to prepayment: The extra amount may be applied to the next month’s payment by the student loan servicers that collect your bill.
This will move your due date forward, but it will not help you pay off your student loans sooner.
Instead, advise your servicer to apply overpayments to your current balance and keep next month’s due date as scheduled – online, by phone, or by letter. You can make a lump-sum student loan payment on the due date or make an additional payment during the month.
Either option can help you save a lot of money.
Imagine you owe $10,000, and the interest rate is 4.5 percent. If you were on a 10-year repayment plan and paid an extra $100 every month, you’d be debt-free more than five years ahead of schedule.
If you have strong credit and a steady job, refinance.
Refinancing student loans might help you pay off your debts quickly without making additional payments. Through refinancing, multiple student loans are replaced with a single private loan, ideally at a cheaper interest rate. Choose a new loan term that is less than the remaining time on your present debts to speed up payback.
Choosing a shorter term may result in a higher monthly cost. However, it will assist you in repaying your debt faster and saving money on interest. For example, refinancing $50,000 from 8.5 percent to 4.5 percent interest may save you roughly two years on your student loan repayment. Even if your payments remained the same, you would save roughly $13,000 in interest.
You’re an excellent candidate for refinancing if you have a credit score in the upper 600s, a steady income, and a debt-to-income ratio of less than 50%. If you want or need programs like income-driven repayment or Public Service Loan Forgiveness, you shouldn’t refinance federal student loans.
Sign up for automatic payments.
If you don’t want to refinance your student loans, enrolling in autopay is another option for lowering your interest rate. If you allow your federal student loan servicers automatically take payments from your bank account, you’ll get a quarter-point interest rate reduction.
Many private lenders also have an auto-pay option.
The savings from this discount are likely to be minor: lowering the interest rate on a $10,000 loan from 4.5 percent to 4.25 percent would save you roughly $144 over the course of a 10-year repayment plan. However, there is still money that can be used to help pay off student loans quickly. Contact your servicer to enroll or find out if an autopay discount is available.
Make payments every two weeks.
This simple approach can be used to deceive yourself into making extra debt payments:
Instead of paying a single monthly payment, split your payment in half every two weeks. You’ll pay an extra payment each year, cutting your repayment schedule and interest charges in half.
To see how much time and money you can save, use a biweekly student loan payment calculator. Questions that are frequently asked
Pay down the interest that has been capitalized.
Interest will accrue while you’re in school, during your grace period, and during periods of delay and forbearance unless the federal government supports your loans. When repayment begins, the interest capitalizes, causing your balance to grow and you to pay interest on a bigger amount.
To avoid capitalization, consider making monthly interest payments while the interest is still collected. Alternatively, before your grace period or postponement expires, make a lump-sum interest payment. This won’t speed up the payoff process right once, but it will result in a reduced sum to pay off.
Stick to the established repayment schedule.
The government defaults to a 10-year payback plan for federal student loans unless you specify otherwise. If you can’t afford to make large extra payments, sticking to the usual repayment plan is the quickest method to pay off federal loans.
Income-driven repayment options are available for federal loans, which can prolong the repayment period to 20 or 25 years. You can also consolidate student loans, which allows you to extend your payback period up to 30 years, depending on your debt.
If you don’t need these choices and can afford to continue with the regular plan, you’ll be on your way to debt freedom sooner.
Make use of ‘discovered’ funds
If you get a raise, a student loan refinance bonus, or any other financial windfall, put at least some of it toward your debts. Consider the following breakdown: You can use the extra money to pay down debt by 50%, save 30%, and spend 20% on enjoyable, discretionary expenditures.
As an employee benefit, some corporations pay off student loans. Find out whether your firm provides a student debt payback program for employees and sign up. You might also establish a side business to help you pay off your college loans quickly. Sell stuff such as clothing, unused gift cards, or photos; rent out a spare room, parking spot, or automobile; or freelance or consult part-time.
Consider making restrictions for yourself, such as applying any $5 or $10 dollars you get to your debts. Some money-saving applications, such as Digit and Qapital, will also assist you in setting savings goals and rules.