Laugh At Adversity with Gary Savoie: Inspirational Messages to Conquer Anxiety, Depression, Fear, Relationships, Self-Doubt, and Self-Esteem
015 - 8 Ways To Pay Off Your Student Loans Fast
Manage episode 210193847 series 1985027
Figuring out how to pay off student loans fast can be a daunting task.
I remember the feeling all too well. It was spring semester 2012, the final chapter of my undergraduate journey. A sense of tension took over my chest.
The anxiety was overwhelming, often keeping me awake late into the night. Feelings of “What am I going to do next?”, “How am I going to make this work?” were occupying my mind at all hours of the day.
Even after accepting an early job offer, graduating, and months into making a good income, my anxiety still lived on. Since freshman year, the same question continued to haunt me, “How will I pay off these student loans?”The same question torments millions of students each year and here’s why:
- The standard repayment plan for student loans is a 10-year track; however, research has shown the average undergraduate takes 21 years to pay off their loans.
- Over 44 million Americans are impacted by the student loan debt, which now totals $1.4 trillion.
- The average graduate of the 2016 class has $30,172 in student loan debt, which is up six percent from 2015.
Having graduated five years ago, the $42,000 in student debt I walked away with is now gone. In fact, a temporary move to Boston, accompanied by a year of excessive spending, and some unexpected medical bills actually caused a little delay in paying off my loans. I’m not only going to teach you how to pay off student loans faster, but I’ll also tell you what didn’t work.
So how did I pay off $12,000 more debt than the average student graduates with and 16 years faster?By taking advantage of the following options:
- In school interest options
Many private loan providers have options which allow you to pay $25/month interest payments while in school. Take advantage of this opportunity, because interest is what kills you.
- Get a job on campus
Okay, I get it college is about having fun, but you can have fun and be responsible at the same time. For me, having a job on campus and full-time employment during the summer (and holiday weekends) allowed me to walk away with $42,000 in debt, otherwise the damage would have been worse. If you’re still in school, find a work study, campus job, fellowship, or some other opportunity.
- Save your summer earnings Unless, you’re a student-athlete your summer breaks are much longer now than they were in high school. Summers are the perfect opportunity to work and save for the upcoming school year. Forget buying the $200 pair of Jordans and pass on Lollapalooza this year. Instead, put the money towards your next school bill. You may not feel great about spending your hard earned cash now, but you’ll be glad you did later. The less loans you take now, the less debt you’ll have later.
- Ignore the deferment period
Most private and federal loans provide a six month buffer from when you graduate to when you have to start paying. This is a privilege and should be treated as such. When purchasing a car, the dealership doesn’t give you a six month buffer. If you’re still looking for employment that’s one thing, but if you’re making an income, then forget the deferment period and start throwing money at your loans as soon as possible.
- Go above the minimum
A $25,000 loan at 6.8% interest with a 10-year pay off track equates to monthly payments of $288. Paying $500 a month instead of $288 allows you to cut ties with the loan in just under 5 years while saving you $5,045.78 in interest along the way. You might be cringing at the idea of paying an extra $200 each month, but even an extra $50 bucks, will reduce 2 years off that 10 year loan and save you a cool two-grand! (FinAid’s Loan Calculator can help) The more you pay now, the less you pay later. Unlike a fine wine, interest gets worse with age.
- Use tax returns
So you’ve been looking forward to your tax return check for months. Even though the check isn’t in your possession yet, you already have ten ways to spend it. As a student and employee, you get a better tax break. These will be some of the best tax returns you’ll ever have, until maybe you purchase a home, so use them wisely. Instead of using them towards your next Spring Break trip, apply them to your loans. Your future self will thank you later.
- Stay at home
Everyone’s home situation is different, but if this is an option for you take full advantage of it. Whether it’s your ego “I don’t want to live with my parents” or your friends pressuring you to move out, don’t listen. The money you can save and apply to your loans (even one extra year at home) is much more valuable at this stage of your life than independence.
- Transfer to a Credit Card
This step is last for a reason. If not taken seriously it can be dangerous, but if you’re responsible, you won’t become a victim of high interest percentages. You should be at the very end of paying off the final dollars you owe and your credit score should be pretty high from making payments overtime. My rule of thumb here is if you have less than $7,000 (total) and can get 0% interest for 20+ months then this is a great option. There will be a small transfer fee upfront, but if you can pay off your card before the 0% expires you’ll save hundreds!
Figuring out ways to pay off student loans fast is a heavy burden for anyone to carry. If you’re currently a student then combining as many options as possible is a great way to set your future self up for success; however, if you can only commit to one option that’s better than nothing. Even if you’ve already graduated there are still plenty of tips that you can apply.
At the end of the day, your financial future rests in your hands and unless you win the lottery, your loans won’t disappear overnight. But, if you keep working at them, they will be gone before you know it.