Being debt-free is liberating, and as you enter the job market, you’d want to declutter yourself of all the past dues. However, clearing all debt isn’t always easy, or quite briefly, it could take more time. The average US public university student borrows about $32,673 to complete a bachelor’s degree, which is humongous.
Not all debt is bad, so to speak. And as much as student loan debts aren’t in that category, it’s hardly something you’d love trailing you. The good thing is you can pay off your debt and start saving to achieve your financial goals.
So, how do you pay off rapid student loans quickly? Please learn more about the financial tips and tricks to get yourself off the debt hook.
1. Pick the Right Repayment Plan
Loan repayment plans vary, and picking the most practical may be challenging. By default, federal loans offer a 10-year repayment plan, which is standard. On the other hand, private loans can provide more extensive repayment plans spanning 25 years.
The US federal government recently introduced the income-driven repayment (IDR) plan to give loan borrowers breathing space. However, it’s best to know that such reliefs may extend your repayment plan despite allowing you to pay way less than you’re used to. That could keep you in debt over an extended period, and you may not repay your debt sooner.
So, here’s the thing: Paying off your instant student loan debt within ten years can be reasonable. For federal loans, that’s the standard allowable amount of time. However, you still can reduce this span and pay off your debt within less than ten years. That’ll require you to pay more in monthly repayments, but it can be worthwhile in the long haul. The most significant advantage of increasing your monthly repayment is that it reduces the interest amount you have to pay. That helps trim your loan further.
Please understand that private lenders may not allow you to change your repayment plan for your immediate student loans. However, you can get them to cut the set span by refinancing your loan. Please be aware not to pile up debt and make your monthly repayments more overwhelming and hard to pay off.
2. Cut Down on Capitalized Interest
Adding interest on top of your existing interest can only extend your student loan repayment period and overwhelm you with high monthly repayments. So, there’s only one to swerve this bullet—by avoiding capitalized interest. Remember, your loan may accrue interest while still studying, which may capitalize and add to your student loan balance.
Capitalized interest, by definition, is the total unpaid interest amount that does to your loan’s principal balance. This amount can be significant and may heavily weigh on you when you hit repayment. However, paying off your loan interest while studying may be challenging. With no job or, perhaps, working part-time, earning sufficient money to pay off your bills and cater to your loan can never be a breeze.
The glad tiding is that you can devise a saving plan if you’re working part-time by keeping a proper record of your expenses and setting up a budget—and sticking to it. Also, ensure you pay off your credit card debt and automate your savings. A professional finance expert can offer invaluable advice on spending your money wisely, allowing you to stash just enough money to pay off your accruing interest.
3. Refinance and Consolidate your Loans.
You can refinance your student loan and obtain more favorable terms to make your repayment easier. The best-case scenario is that refinancing your student loan may offer you better interest rates and repayment terms. And the middle-case scenario is that you’ll have to pay off more in monthly repayment and settle your loan quickly.
The worst-case scenario is that refinancing your student loan may deny you certain essential benefits and repayment options like student loan forgiveness programs. Such benefits allow some leniency on loan repayment, although they may not always wholly guarantee that.
Despite that, you can refinance and consolidate your loans into a single bill. Acquiring such lowered interest rates can be delivering since this aspect of your loan repayment may be what makes settling your student loan debt more challenging. Even worse, having an accrued capitalized interest as you study can complicate your repayment, making refinancing and consolidation more vital.
It’d be best to understand that refinancing your student loan requires fulfilling every preliminary requirement before acquiring any loan, including the following:
- Impressive credit score (Recommended score of more than 600)
- Solid and dependable income
- Creditworthy cosigner
- Debt The debt-to-income ratio below 50:50
These requirements vary among lenders, and some overly critical creditors may require fulfilling each. Lenient lenders may not be hard on you, so it’s best to do your due diligence before refinancing your student loan.
4. Subscribe to Automated Repayment
Some lenders may deduct money from your pay slip directly through pay-as-you-earn (PAYE). While it’s already a form of automated payment, it almost seamlessly applies to tax deductions and not much on fast student loans. Some lenders offer this provision, which simplifies things further. However, subscribing to automated repayment can be more prudent.
Automated payment can offer you about a 0.25-percentage-point rate loan cut. This amount may not seem very effective at face value in helping you manage your debt and reduce the repayment period.
But that’s not the end of it. Automated repayments won’t make you lose track of every monthly remittance to your lender. That means every payment will be on time, preventing possible penalties and fines for defaulting.
5. Cut Down on Your Budget
Sometimes, all you have to do is minimize your spending to maximize your savings. You can weed out what you don’t need the most in your groceries and let that money accumulate in your bank account before adding it to your monthly student loan repayment.
Besides, you can identify every expense that drains your money the most, including leisure and indulgences, smoking, or playing your favorite weekend arcade games. Other ways to save money can include:
- Packing your lunch to work or school
- Collect and accumulate loose coins and add them to your monthly savings
- Get out of multiple debts that drain your finances
- Put a card spending limit and avoid overspending
- Cut back on rent by getting an additional roommate or moving to a more affordable house
- Cancel any unused subscriptions
Saving money can be more informed if you have financial goals you’re aiming at. The purpose of saving is to squeeze out as much cash as possible from your daily spending to allow yourself to accumulate just as much money to pay off your student loan quickly.
6. Learn a Skill and Diversify your Income Online
Most students seek side gigs to sustain themselves in school when studying, which is good practice. However, even after graduating and securing formal employment, depending on a single income can only be a pay slip away from mixing your financial railroads. If you lose your job, your monthly income will stop coming in, and you may be unable to make any payments. That can lead to possible penalties and accrued interest that increase your debt load.
Diversifying your income can be handy: You’ll earn more than usual and increase your monthly student loan repayment worry-free. The good thing is you may not even have to acquire hardcore skills like operating complex machinery. Instead, you can earn from a wide range of soft skills that make you money online, including:
- Digital and social media marketing
- Website development
- Graphic Designing
- Video editing
- Affiliate marketing
7. Invest your Money in a Business
One way to maximize your earnings is investing it in projects that can, at least, guarantee profit. While working online can be appealing, diversifying your income offline can also be prudent. Understandably, this tip doesn’t apply well to students juggling classes and navigating gripping schedules, so perhaps sticking to part-time jobs and learning a few online skills can be more feasible.
Nonetheless, if you’ve already graduated, have a job, and have pending quick student loans leaning on you heavily, investing in a small business can earn you extra money to pay off your loan quickly. With a bit of cash, you can invest in the following business ideas in the US:
- Lawn care
- Massage therapy
- Consulting agency
- Meal prepping for busy people
- Pet store
- Printing service
- Virtual assistance
- Window washing
Some of these businesses may consume a considerable chunk of your time, so it’s best to sort through them to determine what works best for you. Moreover, you must understand the logistics of establishing them, including cash and labor capital requirements and legal compliance. With the right mentorship and an in-depth understanding of how to go about investing
8. Utilize Cash Windfalls Better
Suppose you’re lucky and earn a lump sum at once; adding that to your student loan repayment can be wise. It’s typical to get tempted to spend the money you earn in lotteries and cash giveaways like promotions and prize money on typical luxury for your guilty pleasure. After all, it’s money that comes out of the blue.
Windfall earnings can save you months of nagging monthly loan repayment. The good thing is that you may not even have to repay your expedited student loans with such unprecedented earnings directly. You can invest in a business and earn more money to repay your student loan sooner.
Always ensure that you have a feasible repayment plan to clear off your student loan quickly. Whether you’re still in school or have already graduated, there’s never a good time to start repaying your student loans.
The earlier you start making your repayments, the less overwhelming your loan servicing will be. You can start doing that right in college or wait until you secure a formal job after graduating—whichever works best for you.
Remember to always focus on your financial goals and prioritize saving. Your student loan will clear sooner with every bit of progress you make.