As a new graduate, tackling your student loans can seem like a daunting task. With repayment terms that can be 20 years or longer, looking at your student loan balance can become overwhelming if you don’t have a solid plan to repay your loans. The faster you pay off your loans, the sooner you’ll have that extra money in your pocket every month.
Student loans can hold consumers back from making large purchases such as a new car or a home. If your student loans are holding you back from doing the things you want to do, you’re certainly not alone. Paying off your loans early can give you the financial freedom to live the life you’ve always wanted. Here are some top tips to pay off your student loans faster.
Pick Up a Side Hustle
More than 40 million Americans have a side hustle, and with so many different options out there to earn significant income on the side, there’s going to be something out there for you. If you dedicate your entire side income earnings to go toward your student loans, you may be able to pay your loans off much faster.
The average monthly income earned from a side hustle is just over $500 per month, or just under $6,00 per year. If you put that toward your student loans on top of your regular monthly student loan payment, a large majority of that may go toward paying off your principal balance, depending on your overall loan balance, interest rate, and payment terms.
Understand Repayment Options
Federal student loans and private student loans have different repayment options, so it’s important to understand how your repayment options impact your finances. Generally, federal loans have a wider range of repayment options that you may be eligible for, such as income-based repayment plans that often include loan forgiveness after a set period of time, or extended payment plans as long as 25 years.
Private loan repayment options will vary from lender to lender, but more private lenders are offering multiple repayment options similar to federal student loan repayment options. With the student loan crisis getting larger every day, private lenders are more willing to work with borrowers on repayment plans that are easier to handle.
Use Multiple Payment Strategies
Aside from paying more than the minimum payment on your loans, whether that’s through a side hustle or simply allocating leftover income toward your student loans, there are multiple payment strategies that you can use to pay off your student loans faster.
If you have multiple student loans, as many borrowers do when they take out federal loans, you may want to consider an avalanche vs. snowball debt payoff method. The avalanche method
means paying off the debt with the highest interest rate. Considering federal loan interest rates are set by the government each year, this may not be the most effective or motivating method.
When using the snowball method, you pay off the loan with the smallest balance and move to the next highest balance once your smallest loan is paid off. As you pay off your loans and allocate each monthly payment to the next highest loan, you’ll work through paying off your loans faster and faster, giving you the motivation to pay off your student loans sooner.
These are just a few of the many strategies that you can use to pay off your loans faster and gain financial freedom. For even more student loan help, contact the team at Student Loan Solutions today.
The student loan crisis in the United States is at $1.5 trillion and climbing. The average student graduates with nearly $40,000 in student loan debt, and for many, that can seem like an impossible debt to pay back. Deferment, forbearance, and eventually student loan default rates are on the rise, and without any real action to change the way student loans are managed, more and more college graduates are going to find themselves in serious financial trouble.
At Student Loan Solutions, LLC, our goal is to help students understand their student loans and the tools they can use to make repayment easier. Whether it’s providing budgeting tips or working through refinancing student loans, we are there to help with all of your student loan needs.
Student loan consolidation is a very popular option for many students, as it allows for lower monthly payments often over a longer period of time. If you’re not familiar with student loan consolidation, here’s what you need to know.
What Exactly Is Student Loan Consolidation?
Student loan consolidation involves taking all of your student loans and combining them into one loan. While there isn’t a guarantee that your monthly payments will be lowered, if you’ve seen a significant boost to your credit or have the option to choose a longer payment term, you may be able to lower your interest rate or extend your payment terms to reduce your monthly payment.
You may or may not end up with a new student loan provider, depending on how you consolidated your loans. As with any decision, there are pros and cons when it comes to consolidating your loan. Before we discuss those, let’s take a look at the difference between federal and private loans and what that means for consolidation.
Federal Loans vs. Private Loans
The biggest difference between federal and private student loans is the option for various repayment plans and repayment benefits that you receive with your federal student loans. Income-based repayment plans and extended payment plans are popular with borrowers that have federal student loans, and are benefits that are not offered by all private lenders.
Before you consolidate your federal loans, do diligent research. Consolidation may cause you to lose your federal loan benefits, such as various payment options, forgiveness options, and more. Private loans often have a higher interest rate and fewer repayment terms.
Pros of Loan Consolidation
- Make payments easier – if you have multiple student loans, it can be difficult to keep track of all of your payments and their due dates. Debt consolidation combines your multiple loans into one singular loan, meaning one payment per month.
- Potentially lower interest rates and monthly payments – while this will vary depending on a number of factors including your credit score, loan balance, and new lender consolidating your loan, there’s a chance that you’ll lower your interest rate and monthly payment in turn.
Cons of Loan Consolidation
- You may lose out on federal loan benefits by choosing federal student loan consolidation – as we mentioned, if you have federal student loans, do thorough research before consolidating your loans. Your new lender may not offer the same benefits and payment terms that originally came with your federal loans.
- Higher costs – while refinancing for a longer payment period may help with your monthly payments, it also means that you end up paying a lot more in interest.
- No guarantee of savings – consolidation may not be right for everyone, and it’s important to realize that consolidation doesn’t guarantee that you’re going to save on interest or lower your monthly payment.
There’s a lot to consider when it comes to consolidating your student loans. If you’re still not sure if student loan consolidation is right for you, contact the team at Student Loan Solutions today for your free assessment today.