As a student landing your first job, it’s thrilling to know you made it. But you still need to pay off that student loan that brought you this far. Sure, it’s going to delay your life decisions like marriage and buying a house, but first things first. Get that loan off your back and then get on with your life.
These few strategies will help you be free of your student loan:
- Start repaying while at school
Usually, students wait to get their first job before they can begin to repay their loans. However, it would be wise to pay little by little while you’re still a student. Take up a part-time job while you’re at college and use most of it to pay off your student loan. This will certainly reduce your burden as you step into your first job. Plus, it will give you the much-needed headstart over your peers.
- Think of your loan as a mortgage
If you can afford to, treat your loan as a mortgage and pay larger amounts so that you reduce the principal quickly. By reducing the principal considerably, you will consequently also reduce the time period of repayment and the interest that is levied on your loan. You could also think of sending in checks twice a month rather than once a month. That’s definitely going to work faster for you. With a reducing principal, you will be debt-free faster than you think.
- Set up a five-year plan
Setting up a time horizon gives you enough breathing time to pay off your loan. It also keeps you firmly on the path of payment, never veering off from paying your monthly instalment. By paying regularly towards your loan and having a definite closing date in sight, you are committed to paying month after month. You can create an online budget and see how much you can set aside for this payment. This will give you a clear indication of the road ahead.
- Work for an organization that offers help with student loan repayment
Considering that most students carry the burden of a student loan into their first jobs, organizations are now offering help with loan repayment. Now, so useful is this perk that students say that this would be one of the reasons for them to accept a particular job. Usually, employers pitch in about $100-$300 a month while others can also go up to $2,000 a year!
- Pay more than the minimum
If you pay only the minimum amount asked for, you could be falling into the trap of your lender because he can charge you more interest in the long-term. Instead, study your budget and see how much more you can draw out of it to add to the principal. This could help cut down any extra interest from piling up because by doing this, your principal will now decrease.
To help you do this, remember to pay on time by auto-pay; make another payment the next day. By making the second payment after the due date, you have only a little time for interest to pile up and most of your payments will go towards the principal. Set up a calendar so that you don’t forget to pay.
- Refinance your loan
You can get a much lower interest rate and have all your student loans bundled into one payment per month if you refinance it. This is a very good option for you. You can take the services of a private lender and consolidate your private and federal loans.
With the advantage of having good credit, you also stand to get a good interest rate. Go a step further and ask for a short repayment term which will discipline you to pay your loans committedly and faster too.
- Live frugally
Lead a frugal lifestyle so that you put away more money towards your student loan. If it means living with your parents, it’s well worth doing till you’re able to work off your loan entirely. However, if you prefer to live on your own but frugally, you can avoid buying expensive clothes, shop at thrift stores, use public transport, cook your own food, use your electronics gadgets for as long as you can. On the whole, it means you don’t be wasteful of money till you’re completely paid up.
- Take advantage of Student Loan Forgiveness
By opting for the Student Loan Forgiveness option, you might no longer have to repay your student loan. Either some part of it or the entire loan could be forgiven or waived in exchange for your agreeing to perform some kinds of service. This could include public service or teaching.
There are certain fixed requirement plans under which you could qualify. If you do, your outstanding loan could be waived off if you have already paid 120 instalments to your loan. However, one thing to bear in mind is that the waived amount is taxable.
- Make more money in your free time
Why not earn some money in your free time? Consider signing up with online paid survey sites that pay you to participate in their surveys for which you would be paid a decent sum. These websites also host competitions, so there’s a chance of winning something there too. Most online paid survey websites offer you payouts via Paypal, which makes this a lucrative method for anybody looking to make Paypal money.
- Automate your payments
A good way of reducing your loan is to automate your payments. Besides, by setting aside your monthly loan instalment, you reduce your temptation to spend on inessentials.
And the good news is that there are certain loan servicers who will reduce your interest rate if you set up automatic payments with them. You can get discounts on interest rates through such servicers, so it’s a strategy well worth investigating.
Paying off student loans can be demanding – financially as well as psychologically. However, don’t let this affect your health. Keep calm and healthy in your journey to total repayment. With a little help, you might not be far away from your goal.