Getting a tertiary level of education is an important step in cementing your entry into your field of choice. Be that as it may, tuition costs can be astronomical. The average college student needs financing to get through school.
While some parents can afford to pay for a tertiary education, most of them simply can’t. This is the reason that students try so hard to get scholarships and grants. However, not every student is so lucky. This is where student loans come into the mix.
Getting a student loan allows you to complete your education by providing you with a credit option that helps you to finance your tuition. When your program ends, you are required to repay the student loan.
This is typically done based on a repayment plan that was established. This plan sets out the duration of payment, the frequency of payment, and more. Many standard repayment options translate to students spending ten or more years repaying the loan.
This is a very long time to be stuck paying a loan, so naturally, you are probably interested in finding out what you can do to pay off your student loan much quicker than you’re required to.
Here is an outline of some of the strategies that you can use, which should help you to pay off your loan in a speedy manner.
Focus Your Additional Earnings on Paying the Loan
When you’re making a specific amount of money at work, you organize your spending based on that amount. At some point, you are likely to get a raise, a promotion, or a better-paying job.
Should you get any of these things, the result is that you have more disposable income. Of course, inflation reduces the spending power of money, but that reduction is not significant enough to prevent you from having extra to spend.
Many people tend to use this extra for all sorts of things that they couldn’t afford and did without before the raise. Having the extra money does not mean that you should irresponsibly blow your way through it.
What you should do is channel the additional income towards paying your loan. There is a lot of financial freedom to be had when your loan is paid, so use the opportunity to strengthen your position against the loan.
You should consider using your tax refund in a similar manner. It might feel like free money for you to spend carelessly, but why not put it towards the worthwhile cause of getting rid of your student loan?
Make Financial Sacrifices
Many people don’t want to hear this because they think that they should always be able to enjoy the things that they want to in life. There’s nothing wrong with wanting to enjoy nice things, but sometimes you need to concentrate on the more important tasks at hand.
Pencil out the things that you do with your earnings so you can see what you can cut back on. You don’t need a paid subscription to every movie streaming platform that’s available.
Exceed the Minimum Required Payment
While minimum payments are convenient in terms of what they cost, they can be the reason that you spend ages paying off the loan. These payments don’t make a dent in the grand scheme of things, and interest has a lot to do with that.
Remember that the loan consistently accrues interest, and any payment you made is first used to cover the interest. The principal only gets covered if there is anything left after outstanding interest has been accounted for.
This is the reason that you need to attack this loan and aggressively reduce that balance. Here’s something to consider. Paying the minimum payment figure over the typical ten year duration with a typical 6% interest rate could result in interest adding up to an additional 25% of the initial amount borrowed.
Even a slight increase in your payment schedule can take years off your repayment term and lead to high savings on the cost of interest.
Obviously, this option is not available to everyone, but that doesn’t make it any less of a viable option for clearing your student loan. An appropriate credit score, good payment history, and a consistent source of income are all the ingredients you need to make your mountain of student loans much easier to deal with.
The idea behind refinancing is to reduce the amount of interest and the number of loan sources that you need to deal with.
To this end, you consolidate all your existing student loans into a single private loan, which pays off the others. This new loan ideally has a lower interest rate. Selecting a shorter repayment term is a great way to get yourself into the habit of making larger payments.
If you can, try to acquire the loan from a credit union, as such an institution is known for the favorable interest rates that it offers.
Explore the Option of Autopay
If refinancing is not an option for you, then maybe you can consider using autopay, which could help you in reducing the interest rate associated with your loan.
If you got the loan via federal student loan services, you might be eligible for an interest rate discount. You get this discount when you allow the entity to deduct your payments from your bank account. Not all private lenders offer this, but there are some that do.
Note that the discount offered is not typically a large one; however, any interest reduction is welcome, since it provides some level of extra money that can be used to clear the loan.
Get a Side Hustle
If you’re able to live and meet all your expenses with your current earnings, then that means that your needs fall within the boundaries of what your earnings can cover. For many people, though, the money they earn doesn’t leave much excess to enjoy once those expenses have been covered.
If this sounds like you, then a side hustle could be the perfect solution to your problem. Since you can cover everything as is, that means that you can dedicate the money from the side hustle exclusively to paying off your student loan.
If you want some ideas for a side hustle, here are some of the most popular ones:
- If you own a car, then you can earn some extra money by transporting passengers for either Lyft or Uber.
- You can make deliveries for Amazon or Uber Eats, and you are paid per delivery.
- Get into dog walking or dog sitting. Of course, you do need to do a bit of research if you’ve never done it before. Many people are willing to pay for the convenience of not having to walk or attend to their dogs for a time period.
- Babysitting is something that you can consider. There are websites that you can use to advertise your babysitting services. Note also that mastery of special skills, such as CPR, make people more likely to hire you.
- Become an online freelancer. Upwork, Freelancer, and Fiverr are three of the top freelancing sites available. Many freelance jobs are available, and you can use them to your advantage to make some extra cash. Some of these jobs require specials skills, but others, such as writing and being a virtual assistant, are jobs that you can learn to do as you work.
- Renting your car is another option that you can check out. The car rental industry is very lucrative, and it provides you with a passive income. This means that you don’t have to actively do anything to earn consistently. However, you may end up stepping outside the lines of your insurance company, so be sure that you talk to them before you make the decision.
Establish a Budget
A budget is one of the most underrated tools that is available to you. This is because it helps you to get a real handle on where your money is going. Sometimes you don’t realize how much of your money you unnecessarily burn through until you lay it out in the form of a budget.
Creating a budget is one thing. You also need to stick with it for the best results. One of the cool things about establishing a budget is that you are likely to discover that there is extra money that you didn’t even realize you had.
What better way is there to use this surplus of cash than to throw it at your student loan?
Use the Debt Snowball Method
This method has helped many people pay their loans off to great effect. The concept of a debt snowball is quite simple. Lay out all your debts to get an idea of the smallest to largest ones. Start by channeling your focus and resources into the smallest one. Once that is done, any money that was going to it is now available for you to use on another loan.
Repeat the process and focus on clearing the one with the smallest balance first. Keep doing this until you’ve cleared them all. You’d be surprised at how effective this method can be.
Consume Motivational Material
This one may sound a bit weird, since it’s not a way to help you come up with more money, but it helps. Many people take a lax or nonchalant attitude with student loans because the time it takes to pay them off can seem like forever.
Find some motivational material to either read, watch, or listen to that helps you to remember that each step on the journey is a badge of pride.