In the US, the cost of college education is so expensive that more than half of the students have to take an average of $25,000 student loan to finance their education. While the thought of paying back your loan sounds terrifying, many success stories prove it’s not impossible. In fact, there are many ways you can pay your student loans sooner than you expected.
But why should you try to repay your students loan faster than required? Well, because doing so brings a lot of benefits. First, you’ll save a lot of money in interest. Second, it will give you freedom to spend the money you earn on some of the things you’ve always dreamed of, like travelling or buying a new car. Third, it will give you so much peace of mind.
Here are simple ways you can get out of your student debt more quickly:
- Study the repayment guidelines. Know what your minimum required payment is, when payments are due, and how much you intend to pay each month.
- Pay your loans while still in school. It might be surprising to know that the interest meter in most loans is running even while you’re still studying. The unpaid interest is then added or capitalized to your principal balance as the required payments begin. A new calculation is made based on the new bigger balance. The payments you make while still in school can lower interest capitalization. If you don’t have enough funds, the least you could do is to cover the interest of your credit.
- Pay more than your minimum monthly payment. A little extra payment can lower the interest you need to pay and lower the total cost of your loan over time. There are two things you can do so you can pay more each month: earn more and spend less. To earn more you can take a part-time gig or start a side business on top of your full-time job. To spend less, think of discretionary expenses you can lower or live without or think of cheaper places to live.
- Sign up for automatic debit so your student loan payment will be automatically deducted from your bank account every month. The greatest benefit to this is that it can help you not to miss any payment. Of course, this requires that you always have enough money in your account every month for the payment to clear. Some lenders may give you an interest rate deduction just for enrolling. Ask your loan services if your loan qualifies for this benefit.
- Use your tax refund to pay some of your student loan debt. It’s even possible that you got a refund partly because you paid your student loan’s interest; and using it to pay your loan could be the smartest thing to do.
- Pay biweekly instead of monthly. Paying more than once each month can lower down or keep the credit’s interest at zero.
- Ask help from your employer. Some private companies have programs to help their employees repay their student loans as part of their benefit package. Others who do not have an existing program are also willing to include student loan repayment in their benefit package as their way of attracting top talents. If you’re working for the government, then you are entitled for up to $10,000 worth of assistance each year for repaying your federal student loans. This can be done through the U.S. Office of Personnel Management’s Student Loan Repayment Program.