Do you want your student loans gone quickly, even though the monthly payments seem to be making your budget even tighter? Student loan debt can be a pain to deal with from a financial standpoint. Even though your loans won't disappear overnight, you can start budgeting to make extra student loan payments to eliminate your balance faster.
Start by Refinancing Your Loans if Necessary
If your minimum payment seems too high, check your interest rate and see if it can be lowered. Federal student loan interest rates in the 2012-2013 academic year were as high as 6.80 percent. Whether you have Federal loans or private loans, if most of your monthly payments get eaten up by interest each month, it may be time to refinance your loans.
Refinancing your loans to lower your interest rate might even lower your monthly payment and can provide you with extra money to put toward the principal balance and not the interest.
Utilize Your Tax Deduction
If you've been paying on your student loans for some time, you should know that you can receive a tax deduction on the interest that you pay throughout the year. When you file your taxes, it's important to take advantage of this offer.
Instead of using your tax refund on miscellaneous expenses or leisure activities, you can make one big lump sum payment on your student loans to reduce the principal balance. It may not sound as exciting to use your tax refund to make extra student loan payments, but it's a great way to shave off that debt faster.
Start Paying Biweekly
There is no rule that says you can only make one payment on your student loans per month. Paying biweekly on your loans give you more opportunities to put extra money toward the balance.
In order to obtain the money for the extra payments, start small with amounts like $15 or $25. For example, if your student loans are due toward the end of the month, try to set aside a small amount of money during the first half of the month to add onto your payment. You may not even notice an extra $20 gone from your account each month once you get into the habit of doing this.
To increase your extra payments and stretch your budget, you can take $10 off each variable expense you have. For example, if you take $10 off your budget for groceries, fuel, dining out, entertainment, household goods, and clothes, you'll have an extra $60 that you can put toward your loans each month.
Add a Stream of Income
If you are having a hard time squeezing extra money out of your budget, but still want to make biweekly payments on your student loans, you can always add an income stream by getting a second job, selling items from your home, or doing services for others for cash.
If you have availability to work an extra 5-10 hours per week, you can make a sizable amount of money by freelancing your skills and talents, whether it's writing, photography, design, tutoring, babysitting for friends family and neighbors, or getting a temporary part-time job that has flexible hours.
You can use your additional stream of income solely for making extra payments on your student loans or you can split the extra income you earn between debt payments and savings.
Paying extra on your student loans can cut months or even years of payments off your initial term and save you thousands of dollars in interest, as well. Whichever strategy you choose to boost your payment amounts, make sure your lender puts the extra money you contribute toward the principal balance after interest has been paid. Some loan servicers don't do this automatically, so it's important to check and make sure you specifically tell your loan provider how you'd like your extra payments to be applied.
Remember to stay positive on your journey to pay off your loans, because by making extra payments, you will allow your vision of becoming student loan debt free become a reality.