As the second highest consumer debt category in the United States, student loans are a concern for many people. On average, those who graduated in 2017 owed $28,650. Nationally, $1.5 trillion is owed in student loan debt, and it’s predicted that by 2024 the default rates will reach 40%. You may find that your figure is lower if you graduated earlier. Or, it could be higher, depending on the cost of tuition where you went to school.
Whatever your student loan debt total is, there are many advantages to paying it off early. The faster you pay it off, the sooner you can use your income for other financial goals and the less you will pay in interest overall, not to mention the relief of having that huge debt off your shoulders.
Here are some tips for paying off your student loans early.
Make your student loan debts a priority
Think about the last time you needed to save money for something. When you had your savings goal in sight, it’s likely that you cut down on other expenses to achieve it.
Now take that approach and apply it to your student loan debt. This could mean focusing less on other savings, reducing the amount of money you allocate to other debts or taking on extra hours at your workplace so you have more cash to dedicate to repaying your student loan.
However you approach prioritizing your student loan debt, always make sure you’re paying more than the minimum. Going above the minimum payment reduces the amount you need to repay due to accruing interest, which then results in faster debt reduction overall.
Monitor your spending and cash flow management
If it’s been a while since you analyzed your spending habits and cash flow management, now’s the time to scrutinize them again. Identify areas where unessential spending is taking place. For example, you may have developed unnecessary shopping habits, or you might be allocating more cash toward immediate wants than you should if your goal is to eliminate your student loan debt as quickly as possible.
After identifying two or three areas where you could reduce your spending, decide how much you can divert each month from these areas and dedicate that money to repaying your student loans.
Consider making bi-monthly payments
Traditionally, most people pay their student loans with monthly payments. This is often the easiest way to balance your budget as you can schedule the payments so they take place shortly after your wages are paid.
If you’re able to make bi-monthly payments, you’ll find that you can complete thirteen months’ worth of payments in a year rather than twelve. This is because you’re making twenty-six payments in total. You don’t need to pay the same amount that you would pay every month, but do make sure that the payment you make every two weeks equates to, at least, half a monthly payment. This can reduce the number of payments you make in the long term. Contact your lender or loan servicer and ask if you can set up bi-monthly payments.
Identify interest rate deductions
Some student loan providers will reduce your interest rates if you sign up for autopay. How much they’ll reduce your interest rates by can vary between lenders, so you’ll need to inquiry before assuming what your savings will be. Additionally, some may reduce your interest rates after you’ve made a certain number of on-time payments.
Once you know how many interest rate deductions you can benefit from, take the money you’re saving and apply it to increase your monthly payments. Every small increase you’re able to make will bring you closer to reaching your rapid repayment goals.
Over time, a collection of small financial changes and cash flow management tweaks can bring you closer to paying off your student debt fast. Remember to analyze your efforts periodically, especially when your income changes. This will allow you to prioritize your debts further and manage your cash flow better. In the end, one of the most effective ways to pay off your student loan as quickly as possible is paying as much toward it as soon as possible. There is no substitute for making a concentrated effort to fulfill that financial obligation. If you need help with figuring out how to most efficiently pay off your student loan debt, schedule a free consultation with me by clicking HERE
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Disclaimer: The information contained in this article is for informational purposes. None of the information provided in this article is intended as investment, tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. Please consult with your accountant, finance professional, and/or legal counsel regarding your specific circumstances. Reproduction of this material is prohibited without written permission from Frank Shields, and all rights are reserved. Read the full Disclaimer.