About 33% of college students who graduated with a bachelor’s degree in 2019 left school with an average student loan debt amount of $ 29,900. To those who are just beginning to join the workforce, that number is quite overwhelming. It is challenging to be faced with a mountain of debt when your income still remains uncertain. Getting rid of your student loans is a step in the right direction for achieving financial success.
How To Pay Student Loans Fast
When you are faced with a large amount of student loans, what you may be eager to know is how to get rid of them quickly. Financial planners highly recommend the following when planning to pay off your student loans fast:
Pay More Than the Minimum Amount due
The best thing about paying more than your minimum amount due is the huge savings on interest payments. This move will also improve your credit score rapidly.
Use Your Job to Your Advantage
If you have a heart for public service, then working in this type of industry will open up many opportunities for you, such as student loan forgiveness. Working in the public service capacity could also give you the much-needed experience you need to shift to a private sector if you choose to pursue this career path further.
Consider Refinancing Your Student Loans
Whether you carry federal student loans or private student loans, there are ways to refinance those in order to lessen the load of your monthly payments by at least 50%.
Get a Side Job
Take part in an online gig economy where you can easily receive hourly paid work doing simple encoding, non-voice customer service jobs, writing, or basic administrative work. You don’t even have to leave home to earn extra dollars that you can use to pay off your loans quicker.
Trim your budget
It wouldn’t hurt to give up on some mindless spending and unnecessary subscriptions. You can always spend for things that you want later on once you have paid off a big chunk of your loans.
Which Student Loans To Pay Off First?
If you’re like most individuals that carry multiple loan accounts, you may be wondering which of your student loans you should pay off first. You can choose between these 2 options:
Your High-interest Loans
Termed by financial planners as “debt avalanche”, this strategy will save you the most money. For example, you have 2 loans with a $10,000 outstanding balance in each, one bears 7% interest and the other at 5%. You pay $200 more on interest by keeping that higher-rate loan.
This approach is the “debt snowball method” that is preferred by some people who like to see their loans disappear little by little. The loan account that has the lowest outstanding balance appears easiest for them to pay off first.
What is Loan Forgiveness or Discharge?
By asking for loan forgiveness or joining a discharge program, your student loans may be released from the obligation to pay it in part or full. This option applies only to direct loans made by the federal government. There are different types of forgiveness programs for different types of loans.
Income-Driven Repayment Plan Forgiveness Program
The federal government has 4 plans under this program that allow you a percentage cap of your monthly income as payment for your loan. The plan spans 20 – 25 years, and after this period whatever balance that remains in your account will be forgiven. However, expect to be taxed on the forgiven amount at the time of its discharge.
Public Service Loan Forgiveness Program
This plan is available to government and qualifying pro bono employees where remaining loan balance can be forgiven tax –free after making 120 qualifying payments. To be eligible though, you need to make payments while enrolled in an income-driven repayment plan.
Teacher Loan Forgiveness Program
In as short as 5 years working as a full-time public school teacher, you could be eligible for the Teacher Loan Forgiveness Program. You can have as much as $17,000 of federal direct or Stanford loans forgiven under the program.
Perkins Loan Cancellation
If you carry a Perkins loan, 100% of your loan balance forgive in just 5 years when you work in as a public servant. In some cases, you would see a significant percentage of your loans forgiven for each year of your work.
Permanent and Total Disability Discharge
With proof of either physical or mental temporary or permanent disability, your remaining student loans can be eligible for discharge. Once your loan is discharged, the government, with imposed requirements, will monitor your physical and financial condition for a period of 3 years. If you fail to meet any of the requirements during this period, your loans may be reinstated.
What are Private Student Loans Forgiveness Alternatives?
Loan forgiveness does not apply to private student loans, but there are many assistance programs available to reconstruct your private loans to make them easier to pay off.
- Private Student Loan Modification Programs. Private loans are a struggle to pay, but thanks to a good number of private student loan lenders, they have now come up with loan modification programs that ease the payment burden to a realistic level.
- Refinance to lower your interest rates and payment. You can opt to consolidate your multiple loan accounts into one for a better rate and longer repayment term.
- Put your loans into forbearance or deferment. There are instances where you can request a loan forbearance or deferment. These include, but not limited to, losing your job, going back to school, joining the military, and joining a public service organization.
Whether you have existing federal or private student loans, there are loan repayment programs available for you that you should take advantage of. Start with careful planning that includes setting aside ample amounts for emergency funds, and determine just how much you can afford to pay each month to make your goal a success.