The level of student debt has been on the rise over the years, and it is natural to try your best to break free within the shortest time possible. But paying your student loan can be a daunting task considering you still have other financial obligations.
Nevertheless, it is possible to eliminate the debt earlier than you think, but you may have to make adjustments to your lifestyle. The tips discussed here will help you deal with student loans quickly.
Figure out your total balance
If you want to clear your debts, it is important to determine the total outstanding balance. Over the course of your college education, it is likely that you have taken multiple loans which may carry different terms and interest rates. As such, it can be difficult to keep track of all the debts.
Federal loans are easy to track since the data is available on their database and you only have to look it up. On the other hand, having more than one loan from private lenders may require some extra effort. You can get a statement or request for the balance via email. Alternatively, requesting for a credit report will help you see all the loans owed by you plus the respective lenders. Here, it is also important to note the interest rates.
Approach the debt strategically
While figuring out how to approach the loans, you should focus on the most expensive ones. Normally, this is referred to as the avalanche method since it is designed to tackle the loans with high-interest rates while making minimum payments towards other low-cost loans.
It works best if you start with private loans before focusing on federal loans. The former tends to be more expensive, and it can add up pretty quickly. The idea here is to save money on interest by paying expensive options within the shortest time possible. If you need some motivation to keep going, you can start with the snowball method before switching to the avalanche. However, you should make sure the method you choose is in congruence with your financial situation.
Make extra monthly payments
This is one of the best ways to make sure you clear the loan early. For every payment you make towards your loan in a month, a certain amount settles the interests while another portion is directed towards the principal amount.
When you pay an additional amount, you can either lower the subsequent payments or maintain the scheduled payments while any amount above the set minimum is used to lower the principal amount. In case you have made a payment that is enough to cover the amount required for a few months, don’t be tempted to take a break but instead, continue making regular payments.
To make sure you have some cash available to make the extra payments, you can either start earning more or lower your expenses. You can always find a part-time job as long as it blends in with your schedule.
Consolidate the loans
This is not an option that can make sense for everyone dealing with debts while it can be the perfect strategy for some. Ideally, you take all your debts and combine them into single just right loans. This makes it easy to handle the payments since you are dealing with a single creditor.
Nevertheless, using this strategy means you won’t be able to implement a snowball method which can be quite effective when you want to build momentum and confidence. In some cases, you can get lower monthly payments, but you may end up servicing the loan for a longer duration. While this can be soft on your finances, you will end up paying more in interests.
Before you implement this strategy, you should make sure the deal you are getting is better. Normally, you should restrict the consolidation to private loans and leave out the federal loans. This is because the federal loans have some benefits which can be lost if you consolidate.
The moment you enroll in this program, your payments can be deducted from your account. To encourage borrowers to set up auto payments, lenders offer some discounts. On your part, all you need to do is make sure the account has enough money at all times in order to avoid insufficient funds charges. While the discounts are not huge, even a 0.25% reduction can translate to a significant amount over the repayment period.
Look for a job the makes you eligible for forgiveness
There are certain occupations that can offer forgiveness for student debt and this can either be for the entire amount or just a portion. Basically, you are getting free money, and you only need to ensure you qualify for the program. However, you must have worked for some time besides satisfying all the other requirements.
At times, the forgiveness program is designed to work with income-based payments. As such, the payments can be lower, but you should expect to pay more interests. The catch is that if you don’t qualify for the program, you will have to deal with the increased payments. You can also qualify for loan repayment assistance programs, and you receive money to settle the student debt.
When you are having a difficult time when paying the loan, you might want to enroll in a repayment program. However, if you are serious about eliminating the debt quickly, this can be a bad move. Basically, most programs are designed to help you make lower monthly amounts towards the loan. This implies that you will be dealing with the debt for a long time and the interests will be slightly higher.
If you are thinking about clearing your student debts, it can be scary especially when you want to eliminate the entire balance quickly. But as long as you are determined to make it happen, there are various ways of making the dream a reality. The points discussed here can help you, but you should try to implement what is relevant to your financial situation.