It can be challenging to save for future goals like retirement, homeownership, or an emergency fund when you have student loan debt. You can, however, pay off loans as you work towards other long-term financial goals if you have the right plan in place.
These five strategies can help you reach your long-term financial objectives. Some can even help you save money in the process.
With that said, let’s begin.
4 Effective Ways To Pay Off Your Student Loans
- Apply For Student Loan Forgiveness
Student loan forgiveness programs can help you get rid of all or part of your debt, but each has its conditions and eligibility criteria.
Public Service Loan Forgiveness is the best-known program. You must work for a nonprofit organization or federal government full-time and use the IDR plan to make 120 qualifying payments to qualify for this program. It’s challenging to get approved for the program, so read the fine print carefully.
Another option is to apply for Teacher Loan Forgiveness. You must have an FFEL Program or Direct Loan Program qualified loan and have taught full-time in an educational support agency or low-income school for five consecutive years. One of those years must be after the academic year 1997-98. Depending on your specialization, the program will forgive up to $5,000 or $17,500.
If you’re on an income-driven repayment plan, you might be eligible to have some of your student loans forgiven. Any remaining balance is forgiven when the 20- or 25-year repayment period finishes with these schemes. The forgiven amount will not be taxable if you finish your payback period before 2026.
- Consolidate Your Student Loans
Consolidating student debts into a single, low-interest loan is an excellent strategy to relieve a load of several monthly payments if you’re managing multiple monthly installments.
Similarly, you might consolidate balances from credit cards, student loans, and other high-interest loans, which could save you money and help you pay off your debt faster. But, again, examine the annual percentage rates linked with each debt to see if this strategy is correct.
It’s critical to consider the advantages and disadvantages of consolidating federal student loans. For example, you can have an extended repayment period if you take up a new loan. Furthermore, certain government protections and benefits, such as PSLF or payment suspensions, may be lost if you refinance these loans.
- Pay More Than The Minimum
Paying extra on your student loans is the easiest and most effective means of repaying them. But it’s not always as simple as that.
You don’t have to pay double; you might be able to afford an extra $30 or $50 per month. Do anything you can! Any amount above the minimum will help you pay off your student loans faster. Ensure that your extra payments are applied to your loan’s principal. Increase the additional amount you’re paying overtime as your circumstances allow.
To understand how increasing your monthly payments will affect the overall cost of your loan, use a student loan payoff calculator, including how much interest you’ll save.
- Use Your Job To Your Advantage
There are several ways that your day job can help you pay down your student loans. In exchange for working in a service capacity, several jobs provide student loan forgiveness. Check whether your career ambitions correspond with the criteria for each forgiveness program.
Some doctors, public servants, nurses, lawyers, volunteers, federal agency employees, and automotive workers may be eligible for student debt relief or forgiveness.
Some employers have begun to include student debt aid in their benefits packages, so keep this in mind as you seek your next job or inquire whether your present employer provides this benefit.
Even if it isn’t stated expressly, if you expect student loans to be a substantial financial burden, it can be worth negotiating something into your compensation package.
Final Thoughts
It is up to you to decide whether or not it’s the right decision to pay off your students faster.
If you can afford to pay more than the minimum each month, pay off your student loans sooner rather than later without jeopardizing other financial goals.
On the other hand, because student loans have low fixed interest rates and monthly payments, you may not be in a rush to repay them. If you have additional high-interest debt, like personal loans or credit cards, you should pay those off first to avoid paying more than necessary.
Whatever you choose, it’s critical to understand what you’ll get – and what you’ll lose.
