There are a lot of benefits to attending college. With a college degree, you can unlock more financial and career opportunities. But along with valuable skills and training, most leave college with at least some student loan debt. In fact, Americans owe a combined $1.48 trillion in student loan debt, far exceeding credit card debt. If you’re among the many that still owe money for college, here are 4 tips for paying off your student loans.
1. Understand Your Loans
Understanding the details of your debt can actually save you a lot of money. Make sure you know when your payments are due (and when they’re considered late). Find out exactly how much a late payment will cost you and when that amount will increase. It’s also important to understand the type of interest rate you have. Is it a fixed or variable rate? And how much money will you have to pay over the life of your loan if you make only the minimum payments? Understanding every aspect of your loan can give you extra motivation to pay off your debt more quickly and help you avoid paying extra interest and fees in the long run.
2. Make Sacrifices
Paying off student debt as quickly and inexpensively as possible usually involves a few sacrifices. Instead of buying that nice new TV, phone, watch, etc., dedicate your discretionary spending to your student loan instead. Go without the niceties of life for a while with the understanding that your sacrifices will pay off later. So, wear your inexpensive clothes like a badge of honor. Drive your used car with pride. And display your several-generations-old phone for the whole world to see. Because every dollar you save can help you get out of debt more quickly so that you can better enjoy the fruits of your success (and sacrifices) down the road.
3. Make Extra Payments
If you have the means, and you’re able to sacrifice elsewhere in your budget, try making more than one payment per month on your student loan debt. This doesn’t necessarily mean that you have to double your existing minimum monthly payment. It just means that the total amount you pay every month is more than it was before. And spacing out the extra amount into two separate payments per month is usually an easier way to handle the extra cost. One common strategy involves splitting your monthly payment in half and paying that amount every two weeks. Doing so will allow you to make a full extra payment every year.
4. Use Raises and Windfalls
If you work at a job that offers bonuses apart from your expected income, take advantage of the extra cash and put it toward your student loan. Bonuses usually get spent on superfluous stuff anyway, so why not spend it on something that will put more money in your pocket in the long run? The same goes for unexpected cash windfalls, like inheritances, settlements, and even tax refunds. Even if you don’t want to devote 100% of your extra money to your student loan, set aside at least a portion of it and watch as your principal and interest payments fall.
As you work toward paying off your student debt, remember that the financial sacrifices you make today can pay big dividends in the future and help you unlock the full reward of your educational investment.