Student loans are very common these days and can take 10+ years to pay in full. Typically only mortgages take longer to pay off! And if you temporarily suspend payments or go back to school and interest accrues, your loan balances will increase…along with the pay out period. Here’s what you can do to pay down your student loans faster.
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.
Don’t wait to pay on your student loans
If you just graduated and you can afford to pay, you don’t have to wait until your grace period ends to make payments. Interest it adds up quickly; so consider making interest only payments. This will help prevent your existing balances from increasing before you even make your first payment.
Continue paying if you go back to school
While you’re in school at least half time, you don’t have to make student loan payments. However, just like above, continuing to make payments will help in the long run – even if it’s just interest to avoid increasing your existing balance(s).
Pay extra monthly
Paying 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. Plus you’ll save money in interest.
Make a lump sum payment once per year
Important note about making extra payments: Let your servicer know in writing how you want the extra money applied. If you don’t request something specifically, many servicers will apply an extra payment toward the following month’s payment instead of toward the principle balance. The same applies if you have multiple loans and you want the extra to go to one of the loans. So be clear where you want the extra payment(s) applied.
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 need help sorting out your student loans and options, give LSS Financial Counseling a call at 888.577.2227. We’ll help you navigate your student loans, options, and create a plan of action to get your overall finances on track.