5 Tips for Paying Off Student Loans Faster

How to Pay Off Student Loans

While a college education is often an important factor to long-term financial independence and success, the burden of student loans remains a harsh reality for many Americans. Repayment plans generally have terms anywhere from 10 to 25 years or even more—an undeniably long time to pay back a debt. With a bit of planning and determination, you can shorten the term length and free yourself from the debt sooner.

An Ounce of Prevention Is Worth a Pound of Cure

This applies to loan repayment just as much as it does your health. The best way to ensure that you continue to make loan payments on time is to budget for them. Calculate your monthly expenses compared to income, set limits for each type of expense (housing, food, utilities, entertainment, transportation, and more) and abide by the limits you set. Making sure your student loan payment is included in that budget each month is essential in making it to the end of your repayment term on time.

Set Up Automatic Payments with Your Lender

Some lenders offer a small reduction in fees when payments are made automatically each month. Automation, of course, comes with the added bonus of not having to worry about forgetting to make a payment. Your lender will withdraw the funds from the bank account of your choice each month for you!

Make Bi-Weekly Payments

When setting up automatic payments with your loan provider, find out if they offer automatic payments to be withdrawn every two weeks instead of once per month. If you simply divide your total monthly payment amount in half and have this paid automatically every two weeks, you will make a total of 26 payments each year instead of 12, and the total paid will add up to one extra month’s payment per year. It may not feel like much, but when spread over a handful of years of your loan repayment term, it adds up fast. This is especially convenient for workers who are paid bi-weekly and may not feel a sting to their established budget as much.

Pass on Those Gifts

Did you get a bonus at work? A generous relative sent you a check for your birthday? Maybe you even won a little unexpected money in the office lotto pool! No matter the source, if you have the luck of receiving some surprise funds, resist the temptation to splurge. You can still treat yourself a bit, but try to apply a percentage as an extra repayment to your student loan. Fifty percent is a good rule to hold yourself accountable to, especially if the funds were completely unanticipated in your budgeting.

Consider Public Service

Find out if you are eligible for the Public Service Loan Forgiveness Program (PSLF). This federal program, designed to encourage American college graduates to work in the public sector, allows forgiveness of the remainder of a student loan after performing a required number of years of public service. The requirements for the program are strict, so make sure you can maintain them before you change employers or other big life decisions long-term.

No one enjoys carrying debt, particularly when the debt is for something as essential as your education. Being mindful of tools and strategies for reducing your loan term can make repaying student loans a little easier while also instilling lifelong good financial habits.

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