Easy tips to pay off your student debt and save some cash in the meantime
Let’s face it: finding ways to relieve student loan debt can be a huge weight on your shoulders.
The reality of student loans
Despite the stress it causes, student debt is incredibly common–especially now–among millennials. According to Make Lemonade, more than 44 million borrowers owe $1.4+ trillion in student loan debt. Yep, you read that right: more than $1.4 trillion.
If you’re like most of us, your student loan debt accounts for a slice of that $1.4 trillion pie. And whether that slice is big or small, we recognize #TheStruggleIsReal. Each month, your bank account sees a not-so-friendly reminder that your student loan debt is real, and if you’re like many Americans, it’s not going anywhere anytime soon!
In fact, 60 percent of college graduates (totaling nearly 44 million borrowers) have some sort of debt, and the average debt per borrower is $27,975.
Student debt is stressful, it’s common, and it shouldn’t take over your life! That’s what we’ve put together easy tips to tackle your student loan debt once and for all. With these easy tips, we’ll help you navigate paying off your student loan debt and continuing your journey to financial wellness.
Tips to relieve your student debt
Stay on track.
Falling behind on any payments just means you will have to pay more out of pocket (and more interest) later. While it may feel like you’re gaining money that one month you skip your payment, it’s going to really hurt you in the end. We recommend that you stay on top of your billing periods and make sure you are paying the correct amount each time. That way, you can more easily avoid falling behind and paying for it later—literally! The good news is that, with the 2020 CARES Act, the government provided student loan forgiveness, where payments could be deferred, at 0% interest, until December 31, 2020. If you can, try to iron out your budget now, get your net worth snapshot set, and know where the next dollar should go, all so you can get right back at keeping up with your payments come January 1.
Make extra student loan payments when you can.
Do you have a little extra cash this month? Maybe from a bonus or a raise? Or, maybe you inherited some cash? Or, maybe your investments paid off? However you came across this extra cash, determine if you have enough to make another payment. Consider using this extra money toward your student loans. This can be a quick and easy way to minimize the amount you owe each month and diminish your payment if you are able to do so. Not to mention, paying extra on your principal helps to reduce your interest rates. That means, in the end, you’ll wind up paying less money for borrowing the same amount! Remember, you can always prepay your loans or pay over the minimum payment if you want without any penalty, and this can often help you pay them off faster and save more money in the long run. Heads up! Sometimes student loan servicers will add any extra payment to your bill for the following month. This advances your due date but won’t help you pay off your loans any faster. Make sure to tell your servicer to apply any overpayment cash to the current month’s payment to avoid any issues.
Refinance your loans.
If you have a high credit score, a stable job, a steady income, and have a history of on-time payments, refinancing your student loans could be a good option. Now, there are lots of pros and cons to this kind of decision, and we recommend you take time to consider your options. For example, refinancing your loans would help merge all of your loans into one that has a lower interest rate. In this case, you may be paying a little more each month, but refinancing can help you pay off your loans faster 🎉. But! Refinancing comes with its downsides. You could end up with a lower monthly payment, but a longer term. This means that, while you’d pay less each month, you’d have a higher interest rate that would increase your total payment toward your student loans. Refinancing is right for some, but not necessarily right for all. Take the time to review your finances and consider what refinancing your student loans would look like for you. (Psst, while you’re at it, you might also consider refinancing your mortgage, too.)
Enroll in autopay.
If refinancing your loans aren’t your jam, enrolling in autopay can be another way to lower your interest rate. If you let your loan servicer deduct payments from your account automatically each month, any federal based student loans, and some private student loans, will offer a quarter-point deduction in your interest rate. Although the deduction is small and won’t save you as much as refinancing would, it’s still a little extra savings.
Make bi-weekly payments.
Sometimes the big monthly payment number can seem daunting. Some people prefer to take smaller bites when chewing on—or, well, repaying—a big loan. Making two payments each month could help you to manage your loan payment, while still paying the same amount each month. If you split your monthly payment in half and pay that amount every two weeks, the loan will seem a lot less scary and easier to manage. There are plenty of options to pay off your student loans, just as there are different strokes for different folks! Pro tip: by staying on an every-two-week track, you will make an extra payment each year. This will also help shorten the term of your loan. This biweekly student loan calculator can help you see how much you’d save.
Going to college can be one of the best times of your life, but remembering it through your student loan payments is a big 👎. These guidelines should help you to wrap your arms around your student loan debt, and finally be relieved of both your loan and your stress—for good!
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