Student loans have a tendency to follow people around for a long time. In fact, new studies show that people are now retiring… and hauling their student loan payments along with their golf clubs and cruise tickets.
While new measures have been put in place to forgive people of their student loan debt after a certain number of years, the fact is, you don’t want to hold onto the loans that helped you pay for college. You’re better off using that money for your future, such as to help save for a down payment on a home, start a family, or anything else that you’re looking to do.
So how can you get rid of your student loans faster? Here are 9 actions to help you do just that.
Pay Off the Higher-Interest Rate Loans First
Student loans are not created equal. In other words, interest rates and terms vary (especially between private loans and federal loans).
Financially speaking, you want to pay off the highest-interest-rate debt first. This is because this debt is costing you the most in interest. By focusing on it (and still paying the minimums on all of your other debt), you will be able to dedicate more of your money towards paying off the principal of your loans.
Get your personal plan in place using ReadyforZero’s free program.
Get offers for lower-interest rate debt consolidation loans here on ReadyForZero!Check your rate using ReadyForZero's free debt consolidation tool. People have saved thousands by consolidating higher-interest debts using a single, personal loan, this will not negatively impact your credit. Check Your Rate Now
Live like a College Student for a Few Years Beyond College
You’ve graduated college. But you know what? No one says you need to increase your lifestyle costs. In fact, if you can keep the lifestyle inflation monster at bay for just a few years after walking that stage, then you can funnel more of your paychecks towards paying off your student loans.
We’re talking about having a roommate so that you can split living costs, finding low-cost cell phone/smart phone plans, eating meals at home, packing lunches from your grocery shopping trips, etc.
Shaving years off of your student loan debt repayment or leasing a new car and buying a whole new wardrobe? I think you know which choice will give you the most long-term advantages.
Use Public Transportation
Along the same line of “living like a college student beyond college”, if you can hold off on purchasing a vehicle and instead use public transportation, then you will be able to funnel more of your paychecks towards your student loan debt.
Check out the bus or metro route to your office and see how much it will cost. Chances are very good that when you take into consideration all the costs of owning a vehicle — the car payment, insurance, registration, parking fees, oil changes, etc. — you will see public transportation can save you a lot of money.
No public transportation where you live? See if you can carpool with a coworker.
When Consolidating, Do Not Include High-Interest Loans
If you have the opportunity to consolidate your student loans into a lower interest rate, then I need to let you in on a tip that could save you a lot of money: do not consolidate high interest rate loans in with your lower interest rate loans. This is because the higher interest rate loans will raise the interest for all the others.
For example, I had student loan with varying interest rates each below 6%. Then I had one, smaller private student loan that came with a 9% interest rate. You better believe I did not consolidate that 9% loan in with the much larger pile of loans because it would have increased the interest rate for the entire load. Instead, I consolidated all of the other ones into a very low interest rate, and then focused my energy on paying off the high interest loan right away (see #1 above).
Pay Something on Your Loans During the Grace Period
You’ve graduated (or will be soon), and you’ve entered the grace period before repayments on your loan need to start. Why not start making payments? Money you pay towards your debt now will shave time off the end of a loan repayment schedule.
Pay Interest Before Capitalization Occurs
There is a grace period between when you graduate college, and when the interest that has accrued on the loan will be capitalized. Capitalization simply means the interest is added to the principal loan amount, and then interest is accrued on the new loan amount (read: you pay more in interest after capitalization occurs).
If at all possible, in the grace period months before your repayment begins, make a lump sum payment of the interest. You will save yourself hundreds and thousands of dollars over your lifetime by doing this!
Automate Your Payments
You don’t want to derail any forward momentum you have, and automating your payments will help you achieve this. On top of this, some student loan lenders will reward you with an interest rate decrease on loans you set up with automatic payments. Getting that 0.25% and 0.35% discount can really make a difference, especially over the long haul.
Go Into Public Service
Did you know that depending on what type of career you choose, or where you decide to work, you could have your loans forgiven before the loan repayment schedule is completed? This is an incentive given by the federal government student loan programs in order to help find qualified professionals who can help in high-need areas. See if you are eligible by checking out the Teacher Loan Forgiveness program, Public Service Loan Forgiveness program, AmeriCorps, etc.
Dedicate Your Tax Refunds
You will likely receive a tax refund in your first years after school because of your student loan interest rate deduction. Why not dedicate that right back to paying off your student loans more quickly? Sounds like a win to me.
You can do this. Use a few of the action steps above–the ones that make sense for you–and rest assured knowing you will have those student loans paid off before your current loan repayment schedule expires.
Image credit: Nagesh Jayaraman