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Written by: Phil Bradford
In today's day and age, education costs more than ever before. According to College Data, the average cost of tuition for 2021-2022 was $38,000 for private universities and $10,000 for public universities. Though some students might be able to find ways to put themselves through college, most will need to take out student loans.
Student loans can have a huge negative effect on your finances over time. As we know, student loans are often not dischargeable in bankruptcy. So, it becomes important to make sure you pay them off as soon as possible. But how exactly can you do that? This post will answer that question with 10 ways you can pay off your student loans.
Ready to start paying off your student loans more effectively and start building a better financial future for yourself? Let's get right into it.
Ways You Can Pay Off Your Student Loans
From something as simple as switching to making biweekly payments instead of monthly payments to something as intricate as refinancing your loan, you're sure to find at least one of the ways listed below helpful when it comes to student loan repayment.
Start Early By Getting a Part Time Job in College
If you're still in college, one of the best ways to pay off your student loans is to start early by getting a part-time job. Because of how compounding works, every dollar you pay down now will translate to tens of dollars that you would have had to pay off in the future.
Let's say that you work a job that lets you put away $300 a month towards your student loans... that translates to over $3600 a year! The great thing is that if you are on financial aid, working won't actually affect it (as long as you make less than $7000 a year).
Most colleges have a resource or career center that you can take advantage of when it comes to jobs. If you can't land a part-time job in your college, you can always work for a local shop. And if worse comes to worst, you can always innovate a little and sell things on Etsy, make money selling clothes on eBay, or make money selling photos of yourself online.
Make Additional Larger Payments Earlier
Similar to the first tip, always try to make additional payments to your loan earlier. When you just pay the minimum, typically, very little of your money is actually going towards the principal. This means that it will take longer for you to pay off all your student loans.
Instead, make large payments early on in the life of the loan to cut down the principal. This way, you'll end up paying off the loan faster and also paying less in interest. Just make sure to call your loan servicer and tell them to apply your extra payment toward the principal amount instead of putting it in "pay ahead" status.
Make Biweekly Payments
This is a simple strategy that you can use to trick yourself into paying more of your debt down. Instead of making one monthly payment, split that payment in half and pay it bi-weekly. What happens is that by the end of the year, you'll end up making a whole extra payment!
As suggested in the previous tip, any extra amount of money that you can put towards your loan early on will significantly reduce the amount of time that you need to pay off your loan and also put more money back into your pocket.
Create a Budget and Stick to it
If you can't seem to find any money to put away, it might be time to consider creating a budget. There are tons of budgeting tips online that can help with this, but at the end of the day, the job of a budget is just to make sure that you're bringing in more money than you're spending.
A budget is a financial plan that can help you realize that you either need to make more money or save more money (or both). If you're still a student and want to save more money, here are some tips to help you do so:
- Rent textbooks or get them for free online - Instead of buying the hard copies of textbooks every year, visit some free textbook websites and get them at no cost or rent some used textbooks for a much cheaper price.
- Make food in your dorm or home - Eating out costs a lot (especially when you add up the costs over time). You can save money on food as a student by simply meal prepping and making food in your dorm.
- Take public transportation or bike - Instead of driving around in a car, why not bike to campus or take public transportation? This will save you lots of money over time which you can put towards your student loans.
Apply for Loan Forgiveness
There are certain programs out there that can either completely or partially eliminate your student loans. Most of them have their own unique requirements that you need to meet before enrolling.
Some loan forgiveness programs that you can check out are:
- Public Service Loan Forgiveness (PSLF) - To be eligible, you must be employed in a government or non-profit position and follow a strict 120 repayment plan.
- Teacher Loan Forgiveness program - To qualify, you must have taught for five or more consecutive years at a low-income school or educational service agency.
- Income driven repayment - There are many repayment programs which are income driven, meaning the loan company will accept a portion of your discretionary income for 20 to 25 years, then the remaining balance will be wiped.
Tax Deductions
According to federal law, you can deduct up to $2500 of the interest that you pay to your student loans from your taxes. The requirements for this deduction is that you're legally required to pay off the student loan and your filing status is "not married filing separately".
Most people who take advantage of this tax deduction end up saving a few hundred dollars (come tax time). This is another way that you can get money back (which you can then use to pay down your student loans even more!)
Repayment Assistance from Employers
Ask your employer whether they offer any student loan repayment or tuition reimbursement programs. A lot of employers have begun doing this nowadays and some have even begun to offer free college for workers who decide to sign up for select schools and programs.
This money won't count as taxable income on your end and the great thing is that employers can deduct this payment on their end too. Check with your employer and HR department whether they offer any kind of program that could help with your student loans.
Refinance the Student Loan
Most students take out loans to pay for tuition while they still have a poor (or nonexistent) credit history and credit score. If you've since improved your credit score and now are in good standing with credit agencies, consider refinancing your student loan. Bonus points if you're also employed and have a steady job that pays a decent annual income.
Oftentimes you'll be able to cut down on your interest a lot and also potentially cut down the amount of time you'll need to pay back your loan. If you're going to be refinancing your student loan, make sure to shop around with different creditors so you can get the best possible terms.
Use Any Spare Money
One of the best ways to pay down your student loans is to use any spare money that you happen to find. Does this mean to penny pinch and become a scrooge? No, but it does mean to be cognizant of lifestyle inflation and instead use any extra discretionary income wisely.
Get a raise? Put that money towards your student loans. Win some money at your local poker club? Use your winnings to pay down your principal. By taking your extra money and putting it towards your student loans, you are giving yourself a better chance to pay off your loans earlier.
Another smart move is to start a side hustle dedicated to paying down your student loans (meaning any money you get from the side hustle will go towards your loans). Here are some side hustle ideas to make you some extra money:
- Rent out your golf clubs if they're just sitting around collecting dust.
- Did you get a 1380 SAT score (or even better, a perfect SAT score)? Consider becoming an SAT tutor.
- Everybody loves to get into a festive mood; if you're good with your hands, you can make easy Christmas crafts and sell them for profit.
- Do you have a spare room? Rent it out to receive good passive income that you can put towards your loans.
- Freelance on the side with websites like Fiverr and Upwork.
- Consult on topics that you're knowledgeable in.
Set Up Autopay
An easy way to cut down on your interest payments is to enroll in autopay. What this means is that payments will be automatically deducted from your bank account.
Federal student loan officers will typically shave 0.25% from your interest rate if you set up autopay. Many private lenders nowadays also offer an autopay option. The savings won't be a lot, but any extra money that you can get will help with paying off your loans.
Recap: Ways You Can Pay Off Your Student Loans
So there you have it: 10 ways that you can pay off your student loans. As a quick recap, they are:
- Start early by getting a part time job in college.
- Make additional larger payments earlier.
- Make biweekly payments instead of monthly payments.
- Create a budget and stick to it.
- Apply for loan forgiveness.
- Use tax deductions.
- Get repayment assistance from employers.
- Refinance the loan.
- Use spare money.
- Enroll in autopay.
So what are you waiting for? Pick a few of these tips to move a step forward to become a millionaire! Your future self will thank you for it.
Related: When it's a Good Idea to Refinance Your Student Loans (and When It Isn't)
Phil Bradford is a financial content writer and an enthusiast. He has expert knowledge about personal finance issues and he is a regular contributor to DebtConsolidationCare. His passion for helping people who are stuck in financial problems has earned him recognition and honor in the industry. Besides writing, he loves to travel and read books.