America currently has over $1.6 trillion of student loan debt. It’s at its record high and trends indicate that it will only continue to increase. While student loans make it possible for many people to go to college, it carries many negative consequences.
Missing payments, for example, can cause student loan default and delinquency. Those can have a detrimental impact on your life. This is why it’s important to make a plan to pay off student loans fast.
Here are some of the consequences you can suffer from being in default:
- It can lower your credit score in a significant manner. With a low credit score, it will be hard for you to get other loans or even get rent an apartment.
- Large late payment fees.
- Professional license revocation.
- Income garnishment
- Your tax refunds can be withheld for a couple of years.
- You won’t be eligible for federal repayment flexibility.
- Bankruptcy is not an option to discharge student loans.
Moreover, if you have a cosigner, you can be putting their credit history at risk. To be victorious against student loan debt, it’s important to know everything there is about it and learn about the best strategies to overcome student loan debt.
One of the best strategies to crush your student loan debt is to make large payments to get rid of it fast. But a lot of you might be wondering just how much of a difference it can make to pay more than minimum.
Before we get into how you can pay off student loans fast, it’s important that you first know why that’s crucial.
Why Should You Pay Off Student Loans Fast
There are a couple of benefits that you can enjoy if you pay off student loans fast. Being free from debt means the freedom to invest your money in anything you would like.
Instead of allocating money to pay off debt, you can put the money in your savings account or make major investments such as buying a house or starting a business.
Another less obvious reason is that by paying off your student loans fast, you pay less money overall. This is because you’ll pay less interest when you pay faster. This means that the longer you take to pay, the more you will end up paying.
With that, let’s get into it:
How to Pay Off Student Loans Fast
Make Extra Payments
The key to pay your loans faster is to make extra payments every time you can. While it can be an incredible challenge to a lot of people, doing extra payments can have a significant impact on your student loan balance.
Keep in mind that you don’t have to do large extra payments. If you make small extra contributions to your loan account every month, that will already make a huge difference.
Make Bi-weekly Payments Instead of Monthly
Another strategy to pay off student loans fast is to split your monthly payment in half. Have the first payment on the 15th and the 2nd payment on the 30th. If for example, you need to pay $400 each month, pay the $200 on the 15th and the other $200 on the 30th.
According to Sean Moore, founder of Smart College Funding, “paying half every two weeks equals one extra payment made each year without even noticing the difference.”
Doesn’t make sense, right? Let me explain:
If you pay once per month, you make 12 payments in a year. However, a year has 52 weeks. By splitting payments in 26 weeks, it would be equivalent to paying 13 months’ worth of payment.
According to Huffpost, “on a typical 10-year repayment schedule, this little trick could knock off an entire year of payments (and interest)!”
Refinance Your Student Loans
Another good strategy to pay your loans fast is through student loan refinancing. However, if you want to refinance you need to have a good credit score. One of the reasons why you should use a credit card is to build a credit history.
Strive to have and use credit cards earlier on to build a good credit score. However, be sure you also know how not to use credit cards as you could end up having a bad credit score.
Student loan refinancing is consolidating all your student loans to have just one bigger loan with a lower interest rate. This way, instead of having multiple payment due dates, you will just have one.
However, refinancing consolidates all your student loans into one private student loan. A private student loan is different from a federal student loan. Be sure to know the benefits of federal student loans and private students and their consequences before deciding to apply.
You can use tools to help you with refinancing such as a student loan payoff calculator. It can help guide you by giving you an estimate of just how long it can take you to pay off our student loan debt.
To recap, here are the main strategies you can use to pay off student loans fast:
- Make extra payments
- Make bi-weekly payments
Make use of these strategies for you to better handle your student loan debt. They are systems that work and can help you pay off student loans fast.