Student loan debt is a widespread financial challenge for millions of individuals, often feeling like an insurmountable obstacle that looms over their financial future.
Although the standard federal student loan repayment term is ten years, the average borrower takes twice as long to repay their debt fully.
However, numerous strategies exist to expedite repayment and regain financial freedom.
This article will explore the nine best ways to repay student loans faster.
- Make Additional Payments
Making extra payments is one of the most effective ways to accelerate your student loan repayment.
You can significantly reduce the loan period and the total interest accrued by allocating more funds toward your principal balance.
For example, increasing your monthly payment from $288 to $400 on a $25,000 loan with a 6.8 percent interest rate can help you pay off the loan in less than seven years. Additionally, consider making biweekly payments to reduce your debt further.
- Set Up Automatic Payments
Automating your student loan payments ensures consistency and prevents you from spending money that should go toward your loans.
By scheduling automatic payments at the beginning of each month, you avoid the risk of missing payments and maintain control over your budget.
Just be cautious to spend your budget wisely when setting the payment amount.
- Limit Debt with a Part-Time Job in College
Working part-time during college can help you limit your student loan debt by covering some educational expenses with your earnings.
On-campus jobs and online opportunities are flexible options that can align with your class schedule and skills.
Additionally, consider taking on summer jobs to reduce your reliance on loans.
Side hustles like freelance writing, pet sitting, dog walking, social media management, and online tutoring can also help you generate extra income.
- Stick to a Budget
Creating and adhering to a budget can empower you to reallocate funds toward student loans.
By assessing your spending habits and setting achievable monthly savings goals, you can make consistent progress in paying down your debt.
If budgeting is challenging, use a student budget calculator to stay on track.
- Consider Refinancing
Refinancing your student loans can be an effective strategy to expedite repayment, especially if you can secure a lower interest rate or a shorter repayment period.
However, refinancing may not be immediately available after graduation and typically requires a strong credit history and stable income.
Remember that refinancing federal loans may result in the loss of certain benefits, like loan forgiveness programs and income-driven repayment plans.
Student Loan Repayment: Forgiveness, Tax Benefits, and More
Apply for Loan Forgiveness
Loan forgiveness programs offer the opportunity to eliminate part or all of your student loan debt, but they come with specific requirements and rigorous approval standards.
Programs like Public Service Loan Forgiveness, Teacher Loan Forgiveness, and income-driven repayment forgiveness can significantly reduce your outstanding debt, provided you meet their criteria.
Lower Your Interest Rate Through Discounts
Many lenders offer interest rate discounts of up to 0.50 percent for borrowers who set up automatic payments.
Private lenders may also provide additional discounts based on factors like on-time payment history.
Contact your lender to inquire about potential interest rate reductions and discounts for your personal student loans.
Take Advantage of Tax Deductions
The federal government offers a student loan interest deduction for interest paid on qualified loans during the year.
You may deduct up to $2,500 depending on your adjusted gross income.
Utilize this tax benefit if you’re eligible, and consider allocating a portion of your annual tax refund toward your student loans.
Ask Your Employer About Repayment Assistance
Many employers offer student loan repayment assistance or tuition reimbursement as part of their benefits package.
Some companies, like Starbucks and Walmart, even provide free college opportunities for their employees.
Take advantage of these benefits to accelerate your loan repayment without incurring additional tax liability.
Source: Bank Rate