Higher education comes with many benefits, including higher earning potential, more career options, and opportunities for personal development. However, for many students, it also comes with a burden—student debt. Student debt can impact if and when young people get married, buy homes, have children, and more. So, it’s no surprise that many young people try to pay off their student loans as quickly as possible. If you’re struggling with student loans, there are a few strategies you can implement to help you pay off your student loan debt as quickly and effectively as possible.
If you need assistance with your finances, work with a professional financial advisor from Good Life Financial Advisors of Mt. Pleasant. We’re ready to help create a personalized plan for your specific needs!
Make Extra Payments
The most obvious way to pay off student loans early is to make extra payments. You can do this in whatever way works best for you, whether that’s making a larger monthly payment each month, or making an additional payment later in the month. If you have the ability to make extra payments, you’ll want to make sure your payments go towards your current balance. When some loan servicers receive an extra payment, they put it towards the next month’s payment instead of the balance of the loan.
If you have a decent income but struggle just to make the monthly payment on your loan, a budget may be a huge help. People often incorrectly associate budgets with deprivation, but a budget is really about prioritization. Having a budget allows you to spend money on the things you care about most, such as paying off your student loans, by minimizing your spending in areas that matter less to you.
Make Biweekly Payments
Maybe you’re already living on a tight budget and like the idea of paying more towards your student loans, but you’re not sure where you’ll find the extra money. One simple strategy is to make biweekly payments instead of monthly payments. To do this, you pay half of what you owe each month every two weeks, instead of making one larger payment each month. Over the course of a year, you’ll end up making an extra month worth of payments, but from month to month, the increase should be small enough to feel manageable.
Refinancing has the potential to help you pay off student loans more quickly without having to make extra payments. There are many ways to refinance, but essentially, when you refinance, you combine multiple loans into one loan, ideally with better terms. But refinancing should be approached cautiously.
If you don’t have a good credit score, a history of making your loan payments on time, and a steady income, you’re unlikely to qualify for a better rate. You’ll also want to make sure you’re truly getting a better deal. Many refinancing lenders shorten the length of the loan but increase the interest rate to the extent that you pay more overall. Many other refinancing lenders decrease your monthly payments but lengthen the life of the loan, which can lead to paying more overall. This is not to say that refinancing a loan cannot be beneficial, but make sure you do the math to ensure that you end up with a better deal than the one you started out with.
Enroll in Autopay
Signing up to have your monthly student loan automatically deducted from your account can do more than help you pay on time every month—it can also help you pay off your loan faster. Many lenders reduce your interest rate if you sign up for autopay. However, the deduction is often quite small. For example, federal student loan services offer a quarter of a percent reduction when you sign up for autopay. These minor interest rate deductions won’t shave years off of your loan, but every little bit helps.
Put Extra Money Towards Student Loans
When extra money comes your way, whether from a tax refund, a bonus, or a pay raise, consider putting that money towards your student loans. If putting all your extra money towards your student loans feels like too much, you don’t have to go all or nothing. Maybe you decide that half of any extra money will go towards student loans.
You may also want to consider getting a side gig. Whether it’s driving for Uber, walking dogs, or babysitting, a side gig can provide you with extra income that you can then put towards your student loans.
We’re Ready to Assist
We hope you consider implementing these strategies to pay off student loan debt. Paying off student loans may feel overwhelming, let alone paying them off early. But it is possible, as even small changes can make a major difference. For personalized advice on paying off your student loans, consider working with a financial advisor from Good Life Financial Advisors of Mount Pleasant!