For many recent college graduates, student loan debt can provide a rude awakening when you enter the working world: You’re able to seek out a full-time job and the extra income that comes with employment, but you also have to start paying back loans you took out to fund your college education.
If you have the financial means, you might be interested in doing whatever it takes to pay off student loans quickly and free yourself from this debt. Here are five tips to help make it happen.
1. Pay more than the minimum, if you can afford it.
Different repayment plans offer different repayment terms. There is the standard 10-year repayment plan, as well as income-driven repayment and other plans designed to give borrowers flexibility in how they make these payments.
If you’re looking to pay off debt as quickly as possible, a 10-year plan can offer the fastest terms. But if you have extra money in your monthly budget, consider paying more than the minimum to move up the date when you’ll be able to make your final student loan payment.
2. Refinance to lower your interest rate.
Do some of your student loans offer a high interest rate—exceeding 6 percent or more? If so, refinancing could be an easy way to reduce interest accumulation, lessening the amount you have to pay over time.
You can use our Student Loan Calculator to figure out how much you might save by refinancing your student loans. For example, if you have $35,000 in student loans and pay an average rate of 7.5 percent interest, you’ll end up paying $14,900 in interest over a 10-year repayment plan.
By contrast, if you refinance your student loans at a 4.5 percent rate, you’ll pay just over $8,500 in interest—a savings of roughly $6,400 over 10 years.
3. Find out if your student loan company offers a reward for automatic payments.
All federal student loan servicers offer a quarter-point interest rate discount for borrowers who sign up for automatic payments.
Although this is a fairly small benefit for student loan borrowers, the savings still add up: A quarter-point reduction would save you roughly $144 per every $10,000 borrowed over a 10-year period.
You can apply those savings to your student loans by making an extra annual payment based on that interest savings, allowing you to finish repayment faster.
4. Take advantage of any employer benefits.
Does your employer offer repayment benefits for its employees? It doesn’t hurt to ask. Some employers will offer loan repayment programs that make monthly contributions to your minimum payment, and others may even offer loan forgiveness programs that pay off student loan debt in large chunks according to a predetermined repayment schedule.
These employer benefits are essentially free money toward your student loans, and many employees aren’t even aware that these benefits are available to them. If you’re on the job market or looking for other opportunities, don’t be afraid to ask about these benefits when interviewing.
5. Don’t pay extra on student loans at the expense of other debts.
For some people, the burden of student loan debt pushes them to prioritize paying off this debt as quickly as possible, even at the expense of other financial considerations.
Paying off student loans can be a top financial priority, but keep in mind that the interest rate being charged for student loans is much lower than with other types of debt, including credit card debt. As you make plans to pay off student loans, make sure you’re also managing debts and spending in a way that minimizes the amount of interest paid and keeps your finances in good health.
Once you leave school and start your professional life, student loan repayment is something you’ll need to account for when making financial plans. If you’re eager to get out from under this financial burden, use these tips to create a plan that speeds up repayment and minimizes the amount of interest you end up paying.
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