The statistics about student loan debt today are startling. 7 out of 10 college graduates are paying off student loans, according to the most recent data. The average loan amount is $30,000. If you are fresh out of college, new in the job market and needing to set yourself up in life, a $30,000 student loan debt obligation can be overwhelming.
Student loan debt is the number one stumbling block to getting started with your financial plan and a major stressor among Americans today. Financial stress leads to emotional and physical stress. It slows you down. It interferes with your sleep. It can even make you sick. Therefore, any hacks that we can use to toss student loan debt into the “done that” box the better.
Here are 6 tips to help you reduce your student loan debt more quickly.
1. Increase your monthly payment.
Try to pay more than the monthly minimum on your student loan. The more you can pay each month, the more you will reduce your principal balance. As your balance goes down, so does the interest. Your interest payments are like throwing money into the wind.
When you first graduate, finding a job with sufficient income to meet all of your monthly living expenses, plus make extra payments to your student loan is probably going to be challenging. But, there are ways to do it. For instance, if you get a bonus, use that to make an extra payment on your student loan. If you get cash gifts, put it toward your student loan. Or look for ways to increase your income—join the gig economy. You’re not going to make a fortune, but you can make enough so that you can increase your monthly payments and bring down your student loan debt more quickly.
2. Make bi-weekly payments.
Instead of paying once a month, divide the monthly amount you owe in half and pay this amount every two weeks. Sound strange? If you make your student loan payments this way, you will actually make one extra monthly payment—13 payments in all for the year. An easy way to reduce your principal balance.
3. Refinance your student loan.
This option is only available if your student loans are from private vendors. The process is like refinancing a home. You turn in the old loan and assume a new loan, with a better interest rate. Reducing the amount of money going to interest will go a long way toward bringing down your balance much more quickly.
4. Prioritize your loans.
If you have multiple student loans, begin with the one that has the highest interest rate. Pour all your extra money into eliminating this student loan first, and then work down the line.
5. Take advantage of workplace student loan assistance programs.
Employers are coming up with creative ways to attract the best employees. They want to keep you too. One of the more common benefits today is student loan assistance. If you are just now looking for employment, consider this benefit when deciding about the offer. Or, if you really want the job and it looks like they really want you, put student loan assistance on the bargaining table when negotiating your compensation package.
6. Explore Student Loan Forgiveness Options.
If you have a federal student loan, you might be eligible for one of the student loan forgiveness programs. Each one has certain eligibility requirements, but it is definitely worth a look. For instance, if you take a teaching job in a low-income neighborhood, you might qualify for the teacher loan forgiveness program. Check with the US Department of Education to see if you might meet any of the requirements.
Just because you are in student loan payoff mode, you do not need to put the rest of your financial life on hold. Your student loan payments make life more challenging, but it is important to move forward. There are still a number of other strategies you need to implement in your life at this time. We discussed some of these in a previous blog post.
On a concluding note, try to do everything you can to avoid additional debt, especially credit card debt. If you are already carrying significant credit card debt, meeting your other obligations, plus your student loan payments is going to be even more stressful. A credit card debt consolidation loan may be the answer. A P2P credit card debt consolidation loan is repaid automatically, via direct debit from your checking account. This means that your payments will always be on time and you will improve your credit score. Just one more strategy to get you on your way to financial health and freedom of the mind.