Student loans have now become part of our lives which can take years or even decades to get rid of. In some cases, it becomes almost impossible to imagine a life without student loans, but that life is possible.
The best way to get rid of your student loans is to pay more than the minimum required every month. As you pay more towards your student debt, your interest will be less, and the balance will disappear faster.
We recommend finding out how fast you can pay off your student loans, including the amount of interest you’d save. You can use any student loan payoff calculator to determine that. Here are the essential ways to relieve yourself from student loans.
Pay More Than The Minimum The Right Way
You don’t attract a penalty when you make extra payments to your student loans, but there is something you should be careful of. Student loan servicers may direct your additional payment to the next month’s payment.
It can advance your payment date, but it won’t help pay off your student debts quicker. What you can do is to call your loan servicer and instruct them to apply your extra payments to your current balance. For the due date next month, they should keep it as it is.
You can make additional payments any day of the month. Another way is to make a significant payment on the due date. Any of them can save you lots of money.
For example, let’s say you’re on a 10-year repayment plan with $10,000 student debt and a 4.5% interest rate. When you pay an additional $120 each month, you can get rid of your debt more than five years ahead of schedule.
Refinance Your Student Loans
If you can’t make extra payments, refinancing your student loans can help. However, it’s ideal for taking this route if you have good credit and a steady career.
When you refinance your student loans, you swap several student loans with a single private loan. It usually comes with a lower interest rate. If you want your repayment to go faster, pick a new student loan term that’s small compared to your current loans.
Choosing a shorter term may increase your payment every month. But it can help you clear your student debts faster. You also get to save money on interest, and that’s why we said earlier that it’s better to have a steady job.
You can qualify for refinancing if your credit score is at least in the 600s and a debt-to-income ratio under 50%. If you have federal student loans, don’t consider refinancing, That is, if you want to take advantage of loan forgiveness programs such as Public Service Loan Forgiveness and income-driven repayment.
Go With The Standard Repayment Plan
The government puts every federal student loan on a 10-year repayment automatically. You can then change it to a different repayment plan if you want to.
Maybe you can’t make substantial extra payments every month. In such situations, we recommend sticking to the standard repayment plan. That’s the fastest way to clear off your federal student loans.
Income-driven repayment plans can extend the repayment periods to 20 or 25 years. You can also opt for student loan consolidation, extending your repayment to 30 years maximum, depending on your loan balance.
If you don’t need these options after much thought, you can go with the standard repayment option. That would be the best option for the fastest way out of debt.
Apply For Student Loan Forgiveness Programs
If you’re eligible for loan forgiveness, it’s better to go with it than pay yourself when the government can do it for you. But, of course, that depends on the financial situation you’re in now. Plus, private student loans don’t qualify for any federal loan forgiveness.
Military personnel, teachers, and people providing public service such as doctors can qualify for student loan forgiveness. If you work in a qualifying position for a specific number of years and make on-time monthly payments, you can get your loans forgiven.
For example, Public Service Loan Forgiveness requires you to work for ten years for a qualifying employer. You also have to make at least 120 qualifying on-time monthly payments and submit a yearly employment certification form for you to qualify for the forgiveness.
If you want to opt for the PSLF, you have to contact your loan servicer, and you can proceed from there.
Sign Up For Autopay
If you prefer not to refinance your student loans, you can enroll in autopay. This can decrease the interest rate on your student loans. If you have federal loans, your loan servicers can offer you a discount if you allow them to deduct payments from your bank account.
Private student loans also offer autopay deductions.
Massive student loans can be stressful and disrupt your plans. But it doesn’t have to be. Follow the steps in this guide to help you make the right decisions. If you need help, we recommend that you speak to a student loan expert to assist you. Additionally, due to inadequate business practices, colleges and universities like Devry faced lawsuits. It is best to check if you qualify for student loan forgiveness if you were one of those who were affected.