7 Ways to Pay Off Your Student Loans Faster
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Student loans are a necessary option for many young adults. While they do their job of helping you enroll in the college courses you need in order to obtain your degree, who really wants to spend the next 10 to 20 years working to pay off student loans?
If you have other financial goals to achieve after college, like investing more, buying a house, or saving for your children’s college, you’ll probably want to pay your own student loans off rather quickly.
7 Ways to Pay Off Student Loans Faster
1. Reduce One of Your Lowest and One of Your Highest Expenses
If you have room in your budget to change things around so you can put more money toward your student loans, don’t hesitate to do so. Consider what your lowest and highest monthly expenses are and see how you can decrease or eliminate them altogether so you can free up more money to put toward your student loans.
Some expenses that are fixed may seem non-negotiable, but still try to explore your options with reducing other expenses. Can you take public transportation for a lower fee instead of driving to save on gas and auto maintenance? Can you get a roommate to lower your rent or mortgage payment? Can you reduce your insurance premiums or obtain a more affordable cell phone carrier? Once you find two or three expenses to reduce or eliminate, deduct the savings and put it toward your loans so you can pay more than the minimum.
2. Refinance Your Loans
Having a high interest rate can hold you back from paying your loans off quicker because less money will go toward the principle balance each month. To reduce your interest rate, consider refinancing your student loans. Refinancing can only be done through a private lender, but if your credit is good, you can combine all your student loans into one balance and one new loan with a much lower interest rate. When refinancing is done correctly, it will save you money in the long run and speed up the progress you make on repaying your loans.
3. Live on Half of Your Income
If you can manage, reduce your living expenses to the point when you are no longer able to save a few hundred dollars per month but almost half of your take-home income. While this might not be an option for everyone, if you earn enough money to meet your living expenses and then some, try to scale back your spending and lower your expenses temporarily so you can put half of your income toward your student loans each month.
This may require some serious lifestyle changes, like living on a bare bones budget, moving back in with family, or asking your partner to take on more household expenses. It’s also best to utilize this option if you have a decent amount of savings. Calculate how long you’ll have to live on half of your income in order to get rid of your student loans and decide if it’s doable for you.
4. Get a Second Job
If you don’t feel like you can manage to live comfortably on half of what your earn each month, consider getting a second job that allows you to work part-time outside of your regular work hours. Then, put all the extra income you earn from your second job toward your student loan debt each month.
5. Start Side Hustling from Your Home
Another way to boost your income is to find a way to earn an income right from your home. Most times, you can do this by doing some form of work online. The main difference between a traditional part-time and an online side hustle is flexibility.
While working a part-time job can help you earn a steady and reliable income each month, it might often require you to spend additional time outside of your home and limit the amount of hours you can work as a result. If you have kids and work full-time, you might not have the extra time or energy to work extra hours outside of the home each week.
With an online side hustle, not only can you work from the comfort of your own home, but you can squeeze in time to work during the early morning hours or the evenings along with on your off days. You can create your own schedule that will work with your availability.
With online side hustles, however, there’s no telling how much or how little income you can earn and it may take a few weeks or months before you start earning anything. However, if you improve your network and choose a profitable niche to work in, you will most likely see positive results. Some popular online side hustles include: freelance writing, blogging, selling items online, data entry and transcription work, customer service, virtual assistant work, online teaching and so on.
6. Ask for a Raise
Don’t be afraid to ask your current employer for a raise to increase your income, especially if you’ve been at your job for more than six months. During your annual review, it’s always important to bring attention to your assets and accomplishments so far and discuss obtaining a pay raise as a result.
You can also let your employer know that you are interested in moving up in the company and apply for any promotions that interest you so you can obtain a raise that way. If you receive a raise, keep your expenses at their current level and make sure you put the extra money you earn toward your student loans.
7. Use Tax Deductions and Credits to Your Advantage
If you’re already paying on your student loans, you are eligible for a student loan interest deduction on your federal taxes which allows you to deduct up to $2,500 annually for the interest you pay on your loans as long as you meet the other requirements. If you qualify for any other deductions or credits and happen to receive a refund, you can apply the entire lump sum to your student loans.
Not everyone receives a tax refund each year, but if you do, it can make a noticeable dent in your student loan balance and easily trim off months of payments which will shorten how long it takes to pay off the entire balance.
The More You Pay, the Better
Paying extra on your student loans isn’t always easy and may require you to cut some expenses. However, the more you pay each month, the less interest you will pay and the closer you will get to becoming debt free. Paying off your student loans faster can also help give you lots of motivation since your balance will decrease much quicker than if you just pay the minimum payment.
Feel free to combine any of these strategies in order to maximize your progress.