Many students rely on loans to finance their studies, but these loans can be a bother when you start working and have to pay them. Learning to clear your student loan quickly will help reduce the overall interest the loan will incur, which will help you save a lot of money. The money you save from paying your loans early can help you with your financial goals, and you might achieve financial freedom faster. Let's dig into some effective strategies for clearing an education loan quickly.
Make Extra Payments
The quickest way to clear your college loan is to pay more than the minimum payment. The minimum payment should not be your reference point when establishing the monthly amount you would like to pay. Paying the minimum amount every month will drag out the payment duration, and the interest accrued will be significantly high.ย
You will not be penalized if you pay more than the minimum payment. But it's imperative to note that the additional payment will be deposited to the next month's payment as opposed to the principal. Therefore, you should contact your provider and explain how you would like them to handle the extra payment. You can opt for the principal payment-only option to ensure the additional payments don't go to the next bill. Some loan providers give the option of making your desired changes online, but if your provider doesn't have this option, contact them to get assistance.
Work With a Budget
A budget provides a clear overview of where your money goes. For instance, it helps track how much you spend on groceries, fueling your car, and purchasing papers at an essay writing service, among other things. Thus, budgeting is an important skill everyone who wants to manage their finances effectively should have. You might struggle to pay the minimum loan principal, but you might be surprised how much of your hard-earned money goes to waste. If you develop an adequate budget and stick to it, you will realize you have more money to cater to extra things, like additional loan payments. With your budget effectively guiding your spending, you can channel the extra money you save into your student loan.
Increase Your Income
If failing to make enough capital is why you struggle to pay your university loan, you might want to consider expanding your income base. You can boost your income in many ways, and the first is picking a part-time job. There are many part-time opportunities on the weekends and at night, which provide avenues to get extra cash. Though part-time income can be a great source of additional revenue for your loans, your main job should always be the greatest source of income. If your part-time job generates more income than your main job, you might want to reconsider your employment. Some jobs provide minimal wages and might leave you struggling to make ends meet. If you are in such a situation, switching jobs could be a viable option for clearing your education loan faster.
Take Advantage of Student Loan Forgiveness
One common thing about education loans is the aspect of freebies. Students with Federal loans might be eligible to have some or all of their debts forgiven by various debt forgiveness programs. Here's a list of programs you can check out.
The first plan is the Public Service Loan Forgiveness. Public servants and employees working in nonprofit organizations can have their remaining education loans forgiven after ten years of repaying them using the PSLF. The second program is Teaching Loan Forgiveness. Teachers working full-time in low-income schools for five consecutive years can be discharged from some or all of their Stafford and Federal Direct loans. Thus, if you are in these employment categories, take advantage of the loan forgiveness and achieve your financial freedom.
Enroll in Autopay
Another great way to lower the college loan is by opting to sign up for auto-pay to ensure that most of your money is directed to the loan's principal balance. Many education loan programs offer quarter-point interest rate discounts on loans that allow them to directly deduct payments from their bank accounts. The money you will save from the discount offered is usually minimal, and in many cases, it reduces the interest from 4.5% to 4.25%. Though the plan will not save you much money, the little you save will help you with other financial needs.
Refinance the Loan at a Lower Rate
Loan refinancing is a process where you take out a new loan from a private lender and use it to repay the remaining balance of your college loan. If you are considering this option, you will need to refinance to a private lender who offers a lower interest rate, making it possible to pay off the debt faster and reduce the monthly payment you are required to pay. The private loan lenders determine the interest in the financing loan based on your loan amount and the repayment terms. Other aspects that are considered include your credit history and the debt-to-income ratio. Applicants with a good credit history enjoy more favorable interest rates than those with a poor credit history. So, if you have a good credit record, consider refinancing your education loan.
Talk to Your Employer About Repayment Assistance
Many employers have started acknowledging that many employees struggle with their loan repayment, and as a result, they assist with loan repayment. Some organizations go a step further and provide free college fees for employees wanting to further their education. You might consider talking to your employer to establish whether your organization has such benefits.
Take-Away
Clearing education loans is always challenging for many individuals, especially those with demanding financial responsibilities or insufficient income. You can adopt many strategies to pay your university loan quickly, the main one being making extra payments. Making extra payments on the principal will help clear the debt quickly, reducing the interest that would have accrued when paying the loan over a long duration. Also, seek alternative sources of revenue to increase the income available to pay your loans. Other excellent strategies include taking advantage of loan forgiveness, refinancing the college loan, and enrolling in autopay. Determine the ones that work best for you, get started, and achieve your financial freedom faster.
Aidan has been writing about personal finance for over 6 years. Prior to this, he worked as a Corporate Finance Analyst where he specialized in Due Diligence, Company Valuations and more. He is a CFA charterholder.
