Americans feel the pressure of mounting student loan debt. In fact, one in seven have postponed getting married because of it, while 44% of college-educated people have put off buying a house.
That’s why you don’t want your student loan debt to linger around forever. With the right repayment strategy, guidance, and self-motivation, you can tackle your debt and save yourself a headache. Read on to learn the best ways to get rid of your debt and save thousands of dollars on your student loans.
Check your cash flow. Do you know where your money is going each month? Are there holes in how you spend or manage your money that need to be patched? Focus on these spots. Your cash flow analysis will be your primary guide for choosing a repayment strategy.
Choose a repayment strategy. If you’re making only the minimum payments, you’re doing it wrong — paying the minimum leaves you locked in debt for years. Instead, use the debt snowball or debt avalanche method to make extra payments.
- With a debt avalanche, you pay off the loans with the highest interest rates first and pay only the minimum on the rest. Repeat with the next-highest rate loan and work your way on down.
- Or try a debt snowball by focusing on paying down the loan with the lowest balance first. Once your first loan is paid off, repeat with your remaining loans and make your way up to the largest. Then, prioritize private student loans, since they usually these have higher interest rates and stricter payment terms.
Look into refinancing. You can speed up repayment even more and save money. Refinancing basically means you get one new loan with a (hopefully) lower interest rate. You can refinance both federal and private loans, potentially saving tens of thousands of dollars over time. There are two benefits:
- You’ll reduce interest by getting a fresh loan with a lower interest rate, so you’ll pay less money overall. Check out this list of student loan refinancing lenders that save borrowers an average of $14,000 - $17,000 over the lifetime of repayment.
- You can also lower your monthly payments. This is a good option if you haven’t gotten the hang of budgeting since it can reduce how much you pay each month.
Keep in mind, though, that by refinancing a public loan — essentially, turning it into a private loan — you could be giving up benefits like loan forgiveness.
Avoid income-driven repayment programs unless you’re really struggling to make your monthly payments. They lengthen the payment period, so it takes longer to finish, which often results in more interest payments.
Find forgiveness and repayment assistance. Getting student loan forgiveness is like winning the student loan lottery: It’s free money to pay off your debt. You can apply to have some of your student loan debt wiped away if you’re working in public service or specialized career fields like medicine, education, and law.
Go one step further with a cash windfall. Nabbed a hefty inheritance? Apply that to your loan payment. Tax refund? Loan payment. Birthday check from Grandma? Loan payment. (You get the idea.) While it’s tempting to spend this “found money,” you really should put any surprise cash toward your loans, letting you periodically knock off big chunks from your balance.
Start a side hustle. Earning money on the side can make a huge dent in your student loans over the long term. It doesn’t haven’t to be anything drastic, either. Start out small and try to earn just an extra $200 per month as a brand ambassador, Uber driver, or freelance writer for example.
No matter what strategy you decide to take, Student Loan Hero can help you create a personalized plan of action, putting you one step closer to a debt-free life.