3 Ways To Pay Off Student Debt Faster
Many people are burdened with more student loan debt than they can comfortably repay. In general, most financial advisers consider student loan debt to be "good debt" because it's usually available at lower interest rates than other types of loans, and it goes toward buying a valuable credential – a college degree that can help you earn much more income over the course of your life than a high school degree alone.
But too much student loan debt can hold you back from reaching your financial goals and add stress to your life. And student loan debt cannot be discharged in a bankruptcy – even if you encounter financial difficulty. You can never walk away from your student loan debt; you're stuck with it, no matter how long it takes to pay off.
How can you get out of student loan debt faster, and get on with your life?
Here are some ideas:
Get a Discount on Your Interest Rate
Many lenders offer a 0.25% interest rate discount if you sign up to make your monthly payments via direct deposit. This might not sound like much, but over the course of several years it can add up to hundreds of dollars, depending on how much you owe, and all of that extra cash can go toward reducing the balance of your loan. Another benefit of signing up for direct deposit is that you’re guaranteed to never miss a payment – paying back your student loans can be put on “auto pilot.”
Think about Loan Consolidation
If you owe multiple student loans to multiple lenders and student loan programs at a variety of interest rates, it might make sense to consolidate your loans into one monthly payment at one interest rate. Student loan debt consolidation can often help you get a lower overall interest rate and a lower monthly payment, especially if you agree to extend the term of your loans (and repay them over more years, but at a lower monthly payment). There are a variety of options to reduce your monthly payments, lower your interest rates, or pay off your student loans faster depending on your goals and what you want to commit to.
Make More Payments
Even if you have a low monthly student loan payment, you can pay off more than you owe each month. Federal student loans do not have any pre-payment penalty, so you don’t have to pay any extra fees when you choose to pay off your loans faster. Many people might be better off by first doing a student loan debt consolidation (to lock in a lower interest rate and minimize the required monthly payments) and then pay more than they owe. It’s often better to be able to choose to repay more than you owe on a loan, rather than have a required payment every month that might be higher than you can comfortably afford.
Talk with your lender to see if they offer any unique repayment plans such as biweekly payments (allowing you to repay your student loan with payments every two weeks, thus making 13 full monthly payments per year, instead of the usual 12 payments), or if they offer any other interest rate deductions for things like having a good credit score or having a history of on-time payments.
Getting out of student loan debt is a rite of passage for millions of American college graduates. Even though student loans are widely considered to be “good debt,” the only good debt is ultimately a debt that has been paid off, allowing you to move forward in life with more financial freedom and peace of mind.