Your student loans put you through college, but now they’re putting you through financial misery. As one of the 45 million Americans wondering how they will pay off a student loan, you dream of the day your debts will finally stop bleeding your bank account dry, wondering if it’ll ever arrive.
Take heart. By utilizing the following strategies and sticking to a smart plan, you can conquer your student loan debt faster than you thought possible.
Understand the Details of Your Student Loans
If you know your minimum loan payment amount, but nothing more, you could be overlooking important details. Create an online account with your loan provider to review everything about your loan: interest rate, term, type of loan, and anything else.
This information may help you formulate a more effective payoff plan, like refinancing your interest rate or asking for an income-based repayment plan. Most student loan providers offer different options to work with the needs of their borrowers, so learn about them. They won’t provide if you don’t ask.
Just like you can refinance a home or car, you can also refinance your student loans. This option isn’t for everybody, but could be a great solution if prevailing interest rates have dropped substantially since you took out your loans. You should meet the following qualifications:
- A credit score in the high 600s or above
- Solid income
- A history of on-time debt payments
Refinancing allows you to obtain a lower interest rate on your loans. For example, if you refinance your $50,000 loan from 8.5% interest to 4.5% interest, you will save a whopping $13,000 in interest payments over the life of your loan! This decrease in debt also makes it possible to clear your debt two years early.
Refinancing a loan from a private lender, like a bank, is relatively straightforward. If you have a federal student loan, it is possible to refinance, but often with strings attached. The government itself won’t do it; you can only refinance your federal loan through a private lender, and while this may secure a better interest rate, it also disqualifies you from other government-loan program benefits, like income-driven repayment and potential loan forgiveness.
Make Extra Payments When Possible
Every dollar counts. Even an extra payment of $50 each month could help you pay off your student loan debt years earlier than scheduled. For example, if you owe $10,000 with a 4.5% interest rate, you can satisfy your entire debt five years early just by paying an extra $100 each month.
There are many different ways to boost your student loan payments, even on a tight budget:
- Eat out less and pay the difference toward your student loan
- Apply as much as possible from your work bonus or tax refund to your debt
- Use an app like GetUpSide or Ibotta to get paid for buying groceries and gas, then apply your savings to your student loan
- Ask if your employer offers loan repayment benefits
Just make sure that your student loan provider doesn’t simply apply your extra payments to next month’s payment. Instead, ensure all overpayments are applied to your current balance. Doing so chips away at the total amount you owe and reduces accumulated interest.
Don’t Be Afraid to Seek Help
Student loan debt is now considered a national crisis, so don’t be afraid to ask for help and support. In addition to your family and friends, there are many organizations dedicated to helping borrowers make sense of their loans and establish realistic payment terms.
Some groups like SponsorChange, AmeriCorps, Teach for America, and Peace Corps help members access and qualify for student loan forgiveness programs designed specifically for teachers. Other organizations like Student Debt Crisis position themselves as student loan advocates and provide education and information about no-cost federal repayment options.
Your career path might also give you access to student loan repayment grants. Healthcare professionals, teachers, lawyers, researchers, and members of the military all have grant options available.
As long as you create a purposeful plan and work diligently to make payments each month, you’ll eventually graduate from student debt and embark on a better financial future.
Learn how to save now and retire early: Financial Independence Retire Early (FIRE) Explained.