Reality hits once you’ve graduated from college; student loans come due. Managing student loan payments effectively is crucial to achieving financial freedom and reducing long-term debt. It can feel like a weight pulling your finances down. The faster you can rid yourself of them, the better you’ll be financially. Here are ten ways people are paying off their student loans fast.
The IRS offers a student loan interest deduction under certain income rules on your tax return. It applies to interest paid during the year on qualified loans. The deduction can be up to $2,500, depending on your adjusted gross income. It is available for both federal and private student loans. Use the money you’ll get back in your tax refund to help reduce your loan’s principal balance.
Some employers offer student loan repayment assistance or tuition reimbursement. Employers can contribute up to $5,250 toward student loan repayment assistance or tuition through 2025. The benefit is not taxable as long as the employee continues working for that employer.
Employer assistance can help pay off student loans faster by reducing the principal balance and minimizing interest costs.
Build a budget with your income and your expenses. The student loan should be one of your expenses. Once you’ve mapped out what you have, you’ll know how much more you can pay toward your monthly loan. Without a budget, you’ll be in the dark.
Paying more than the minimum payment can help reduce overall debt and interest costs, accelerating your repayment plan and decreasing your financial burden.
Look at your budget and determine how much and when you can set up automatic payments by linking your bank account. If you know you’re short on funds at the end of the month, set the automatic payment for the beginning of the month. This will ensure you don’t spend the money.
Some lenders will offer a 0.25 percent discount if you set up automatic payments. There are bigger “relationship” discounts also available that go as high as 0.50 percent. Some private lenders will offer interest rate discounts if you meet specific criteria. It could be making a certain number of payments on time or taking out another loan with the same company.
These interest rate discounts can help you save money on loan repayments by reducing the overall interest costs.
For those who can’t afford a lump sum payment each month, set up a bimonthly payment instead of a monthly payment. A bi-monthly payment will help you pay off your loan faster. There are 52 weeks in a year. You’ll be making 13 payments during the year instead of 12. It’s small, but it adds up to paying off your student loans earlier. Additionally, biweekly payments can help you pay off student loans early by reducing the principal balance more quickly.
The standard repayment plan for federal student loans is ten years. But other plans with different pay-off timelines will extend the time you’ll have to pay the loan. For example, federal loans offer income-driven repayment plans. This will lower your monthly payments but it also extends the repayment timeline by 20 or 25 years. If you want to pay your loans off quickly, stick with a standard repayment plan.
If you earn a bonus, put half or more toward your student loans. Part of an income tax refund should also go toward the loan. A raise in salary should be incorporated into a budget, and the excess income should go to student loan repayment.
Using 'found' money in this way can help pay off student loans faster by allocating additional funds towards the loan balance.
You may be eligible for student loan forgiveness through the Public Service Loan Forgiveness (PSLF) program if you are employed full-time in a public service or nonprofit organization. There are many stipulations to qualifying for this program. And it could take a while to be approved.
The Teacher Loan Forgiveness program is for those who have an eligible loan under the direct loan program. You must also have taught full-time in a low-income school or education service agency for five consecutive years. Depending on your teaching specialty, you could have your loan forgiven for $5,000 to $17,500.
It's important to communicate with your loan servicer to ensure that any extra payments go towards the principal rather than future payments.
You don't need to be overwhelmed with being in debt for years. With budgeting and other planning, you could be out from under your student loan debt a lot quicker. Investigate all forgiveness programs, check with your employer and make those timely payments.
