The cost of education in the United States has been climbing for decades, and it doesn’t look like the trend is going to stop anytime soon. In fact, the price of college has been rising faster than the rate of inflation for years, leading to a staggering amount of student loans.
The situation has gotten so bad that the average student loan debt for a graduating senior in the class of 2015 was an incredible $35,000. The current generation of college students will graduate with the most student loan debt in history, and some say that student loans are becoming a burden to society.
Paying student loans is a must so that you will have better financial leverage in the future. To deal with these debts, the following things will be helpful.
Ways To Pay Off Your Student Loans Fast
1. Make Extra Payments Correctly
Making extra payments on your student loan can help you save money in the long run. For some people, it can also help them pay off their student loans early. An extra payment is a lump sum of money that you set aside from your paycheck and sends directly to your student loan lender, rather than paying your regular monthly payment. This lump sum payment will reduce the amount of interest you have to pay on your student loan, and in some cases, it may reduce the total amount you owe.
2. Refinance If You Have A Stable Job Already
You should consider refinancing if you have a good credit score and steady employment.
This method replaces all of your student loans with one single loan, with the hopes that it has lower interest rates. To hasten the debt-clearing process, pick a loan that is lesser than the existing balances of your present loans.
Short-term refinancing generally increases the payments that you need to deal with every month. But at the same time, it can help you deal with your debt faster. It also saves you from incurring a lot of interest.
Keep in mind, though, that you should not refinance your student loans if you want to opt for alternatives like Public Service Loan Forgiveness and income-driven repayment.
3. Try Autopay
Paying off student loans can be stressful, but there are a few things you can do to make the process a little easier. One option is enrolling in autopay, which will help you make sure you always make your payments on time. (You can also enroll in autopay for your car, house, credit card, and more.)
When you enroll in autopay, the amount you want to pay each month will be deducted from your bank account automatically—you won’t even have to think about it. Enrolling in autopay is easy, especially if you have online bill pay with your bank: just log in to your account, select your loans from the list of bills, and enter the amount you want to pay each month.
4. Make Bi-Weekly Payments
For anyone who is struggling with student loans, an option that you may not have heard of is bi-weekly payments. This means that you make payments twice a month instead of once a month. Often, you pay less with this approach because you are paying more frequently.
By paying your monthly student loan payments every other week instead of the standard monthly payments, you can save a significant amount of money over the life of your loan. This is an excellent option if you are looking to save money on interest or have a very specific, short-term goal you would like to accomplish.
5. Deal With Capitalized Interests
A lot of students dream of paying off their student loans as soon as they graduate, but it is often easier said than done. With a lot of student loans, the main problem is capitalized interest—that is, an interest that builds up over time. The main benefit of paying off capitalized interest is that it will save you money. That is the one benefit. It will save you money.
To understand how capitalized interest will save you money, you first need to understand how interest works. Interest in your student loans will continue to add to your principal balance. You may not notice this because your monthly payment will be based on your new principal balance, but it will add to your principal balance nonetheless.
You should consider monthly interest payments to prevent unwanted capitalization. You can also go for lump-sum interest payments before your due dates. Any of these methods will not hasten the debt-clearing process. However, it can shed off unwanted balances in your loan.