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.