The average college graduate has nearly $40,000 in student loan debt. Unless you land a high-paying job right out of school, you’re likely going to take a while to pay things off.
Even worse is the fact that interest accrues over time, which can cause significant issues for borrowers who took out a significant amount in loans, such as intense stress.
Luckily, you have a few options at your disposal.
Not sure where to start? Don’t worry, we got you covered.
Let’s take a look at everything you need to know about how to pay off student loans.
1. Come up With an Income-Based Payment Plan
You won’t get very far when it comes to paying down your debt if you don’t have a solid plan.
While student loans come with a minimum monthly payment, you’re going to pay more in interest over time if you only throw as little money as possible each month.
But, if you tailor your payments to reflect your income, you’ll be able to cut down on your debt in a shorter amount of time and end up paying less overall interest.
A great way to do so is to look at your monthly budget and see how much disposable income you have available. Allocating this money toward your student loans (even if it’s only an extra $50 per month) can go a long way.
2. Consolidate Your Loans
Unfortunately, paying more isn’t always an option. This is especially true for those who have a family to care for.
Loan consolidation is a great option for those have loans from different lenders and find it difficult to manage their payments.
If you choose to consolidate your loans, you’ll often be able to lower your monthly payment and even extend your loan term. This type of financial relief often results in a significant increase in quality of life for the borrow.
Finally, consolidation will allow you to make one single payment for your loans rather than multiple payments with different interest rates.
3. Start Saving More Money
If you’re trying to pay your loans off faster (or even meet the minimum monthly payment), saving extra money every month is a solid method that comes with a handful of other benefits.
To put some extra cash in your pocket, you’ll want to cut out everything that isn’t a necessity. This can include:
- Dining out
- Services that you don’t use often enough to warrant paying for them (Netflix, Apple Music or Spotify, etc.)
- New clothing that you don’t need
- Entertainment expenses (going out to bars, events, etc.)
As you begin to cut down on your monthly expenses, you’ll have more left over to put toward your student loans and any other outstanding financial obligations.
4. Start Making More Money
Saving money often isn’t an option if you have nothing left to cut out of your budget. But, as long as you have free time, you have the opportunity to make more money.
And, it isn’t as difficult as you might think.
Things like pet sitting, babysitting, driving for Lyft or Uber, and tutoring students in a specific subject are great side hustles to help you pad your savings account.
If you can already make your minimum monthly payment, throw a little extra in to help pay down your debt faster. Otherwise, focus on making as much extra money as you need to in order to make your minimum payment.
It’s also possible to take out another loan to pay off your student loans if you’re not able to make enough extra side money. You can check out what the professionals over at Bonsai Finance.
5. Apply For a Loan Forgiveness Program
People who work in certain occupations are able to qualify for a federal loan forgiveness program. Since these jobs aren’t the highest paying, this is a blessing for many.
Let’s take a brief look.
Those who teach in low-income districts will be pleased to learn that they may be able to qualify for loan forgiveness.
Those who are able to secure loan forgiveness will have a certain percentage of their total debt canceled after every full year that they teach for up to five years. You can find out more about this program here.
Those who have signed a contract with a federal agency for at least three years will get a certain amount of money per year to help pay off their student loans.
For those who have a significant amount of debt, the first few years as a federal worker can do a lot to cut down on the amount of money you owe.
Public Service Workers
Last (but certainly not least), public service workers can experience the same financial relief.
In some circumstances, certain full-time public service employees could have their loan debt completely forgiven.
Furthermore, the amount of debt that is canceled isn’t viewed by the government as a scenario where you were given cash that was used to pay off your loans.
This means that the canceled amount is not subject to taxation, making the deal that much sweeter.
Understanding How to Pay off Student Loans Can Seem Difficult
But it doesn’t have to be.
With the above information about how to pay off student loans in mind, you’ll be well on your way to becoming debt-free as soon as possible.
Want to learn more how-to’s that can help make your life easier? Be sure to check out the rest of our blog!