Are you wondering how to pay off student loans easily? Though the thought of it can be intimidating, it is very achievable. A student loan is an excellent way to finance your studies while you pay back in installments with interest. But if not carefully executed, you may end up wallowing in humongous debt long after you’ve left school.
In this article, you’ll learn a few tips and strategies that work for other people — that you can also adopt. The best approach, however, is to reduce the interest you pay. And this is primarily possible by meeting and exceeding the minimum payment each month.
#1 – Pay more than the minimum payment every month
The best way to save yourself from more interest payments is to pay more than the scheduled amount each month. That way, you get to clear your debt earlier and limit indebtedness.
It may not be easy squeezing out extra bucks every month, but you’ll enjoy the benefits in the long run if you stick to it. Try to pay any extra amount like $30, $50, or even $100. It will help to clear off your loan sooner.
However, as you pay, ensure your student loan servicer (the collector of the loan) applies the extra payments to the current month and leave the next month’s payment as scheduled. There are instances when the debtors fail to apply the additional payment to your next monthly installment. If this happens, your extra payment will amount to nothing.
The interest accrued is reduced if you apply the extra amount to the current payment. You can use a student loan payoff calculator to calculate how much you’ll be saving by paying more than the minimum scheduled amount each month. Just make sure that you make a notation on the payment that the extra amount should go towards the principal.
#2 – Refinance your student loans
Refinancing is a wonderful method to pay off student loans easily. It is an excellent option if you have a good credit history. Essentially, you get to make the payment burden lighter for you to bear.
When you refinance, you essentially combine your student loans (federal and private) into one new loan by taking out a new loan with a private lender at a lower interest rate. You may then use the new loan to pay off the initial loan.
Refinancing allows borrowers to secure loans with lower interest rates. This is because the borrowers are more financially stable (since they’ve maintained a good repayment history) than when they took out the first loan.
It allows you to choose new loan terms, including variable or fixed rates. However, it’s important to note that if you decide to refinance your loan, you may no longer be eligible for some federal government programs like income-driven repayment and student loan forgiveness.
#3 – You can also apply to refinance your student loan with a cosigner
Being a cosigner for someone means you share equal financial risk with the main borrower. Therefore, it is best to only do this with people you are close to, like a trusted friend, spouse, or family member.
You may apply to refinance your loan with a cosigner if you need a bailout from your previous loan but don’t have a good credit standing. However, your cosigner must show proof of creditworthiness to get you approved for refinancing your student loan. And if you find someone who is a good fit and is willing to stand in for you, you may proceed.
#4 – You can apply for student loan forgiveness
Loan forgiveness programs are a great way to pay off your student loans with less hassle. There are different types across several states. The federal government also provides the Public Service Loan Forgiveness program, which is a U.S. government program created under the College Cost Reduction and Access Act in 2007. It provides indebted professionals a way to pay off their federal student loan debt by working full-time in public service.
However, you must meet all the requirements to be eligible for loan forgiveness programs. Some requirements include making 120 monthly payments while working full-time for qualified public service. It could also be a non-profit organization. You may also come across companies that promise to forgive all your loans. Be wary of them, as a lot of them don’t deliver in full.
If you’re suitable for student loan forgiveness, you can apply by filling out an Employer Certification Form with the U.S. Department of Education.
#5 – You can apply for an income-driven repayment plan
If you are repaying a federal student loan, you can consider an income-driven repayment plan such as PAYE, IBR, or REPAYE. Income-driven repayment plans allow you to pay back based on your capacity. The interest rate is typically lower than the rate for a standard repayment plan.
For instance, your repayment is, among other factors, based on your current income and family size. Income-driven repayment plans can extend your payoff timeline to about 20 or 25 years. So, if this works for you, go for it.
#6 – The standard repayment plan could be your best option
Federal government student loans automatically place you on a standard repayment plan of 10 years. And that’s about enough time for you to finish paying. However, you can apply for more time if you can’t meet the deadline.
You can apply to refinance your loan, apply for loan forgiveness, pay more than you’re expected to pay each month to fast track your repayment, or apply for an income-driven repayment plan. But if any of these repayment plans seem difficult for you to handle, you may need to stick to the standard repayment plan. Sooner than you expect, you’ll finish paying your student loan.
Several options allow you to pay off your student loans easily. The options discussed in this article are reliable and can make things easier for you. But you can also try other methods that work for you.