Because of the high cost of a college education, it’s quite common nowadays for college graduates to have student loans. These loans can take 10 years or longer to pay off, which is likely second only to mortgages in the length of time it will take you to pay off a debt. And, for instance, if you take a forbearance (or multiple) and interest accrues, that will increase the total loan balance and likely how long it will take you to pay of the loan. With all of this in mind, here are 4 tips to pay off your student loans faster:
- Pay extra monthly. Like any other debt, sending in extra money with your payment each month will help you pay it down faster. Even $5 or $10/month can make a difference; it could save you several hundred dollars in interest (depending on your loan terms). The more you pay above and beyond the regular payment, the faster you’ll pay off your loan…not to mention you’ll save money in interest.
- Make a large payment once per year. Use your tax return, garage sale earnings, bonus, etc. to pay down a chunk of your student loan balance.
- Don’t wait to pay. If you just graduated and you can afford to pay, you don’t have to wait until your grace period ends to make payments. If you are being charged interest it adds up quickly. So consider even making payments on interest only so that your balance doesn’t increase before you even make your first payment.
- Set up automatic payments. Many servicers provide slight interest rate reductions if you enroll in ‘auto-pay,’ where your payments are automatically deducted monthly from your bank account. The sooner you enroll, the more money you’ll save in interest (if that reduction is offered). Plus, signing up for this program guarantees on-time payments, which helps your credit score.
Besides these tips, you could be eligible for loan forgiveness if you’re in the right type of non-profit or public service work. For more information on loan forgiveness, check out the Student Loan Borrower Assistance website.
If you’re struggling with student loan payments – have missed payments or think you might miss a payment – give LSS Financial Counseling a call at 888.577.2227. We’ll help you create a plan of action to pay off your student loans.