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It doesn’t take long following college for the excitement of graduation to come and go, particularly when you realize how much student loan debt you have to pay back.
More than 44 million Americans have student loan debt and the average for the Class of 2017 was $39,400 (up 6% from 2016).
Don’t get stuck carrying a huge amount of debt for decades. Here are seven tips that will ensure that you get your student loan debt paid back as quickly as possible.
1. Research if refinancing your student loans is right for you
The first thing to remember when going about refinancing your student loans is that it’s not an option to refinance federal loans. Private loans, though, are fair game. Because private student loan borrowers usually first take out these student loans when they have a limited credit profile (as young adults, starting college) they are treated as high risk by lenders initially. But a person’s situation might have changed dramatically since graduating and entering the workforce.
In plain English: If you have good credit, a job, and have graduated, you are likely a prime candidate to refinance.
Credible is a great resource to start your refinancing search. The online marketplace allows you to easily compare and contrast rates and options from multiple borrowers at once. You’ll also get actual rates in just two minutes (a lot of comparison sites promise this, but then don’t deliver).
Then, do your research on other student loan refinancers. Here are four to start with:
This is one of the largest student loan refinancers around. If you have a high income and a strong credit history, definitely look into SoFi, because they offer low-interest rates and no predetermined maximum loan amount. Look into refinancing with SoFi here!
Earnest does things a little bit differently. While they take into account a borrower’s credit history, they also look at other merit-based factors when reviewing applicants, like how much applicants have been able to put into a retirement savings account and an applicant’s job prospects. This could be a good option for someone with very little credit history, but a lot of other factors going for them.
This loan refinancing option offers both undergraduate and graduate school loans. The company also has some cool programs like academic deferment if you end up going back to school. If you lose a job while repaying your loan, you might be eligible to stop making payments temporarily. They’ve also partnered with the charity Pencils of Promise to fund the education of a child in the developing world each time it funds a new student loan in the US.
Not a single lender, LendKey is a network of hundreds of community banks and credit unions that will refinance your student loans. It offers a centralized application process along with customer support, to make the process seamless. There can be a huge upside to refinancing with a small bank or credit union, things like better terms or more lenient repayment options, and LendKey makes it easy.
2. Make as many extra payments as you can
Once you are as happy as you can be with your loan provider, do everything in your power to make as many extra payments as you can. At the end of the month if you’ve got any leftover money in your account, put it towards student loans. There are no prepayment penalties, so make it in any amount you can afford. Just make sure to contact your lender in writing and notify them that you will be making additional payments throughout the year. Specify that you want any extra payments to be applied to principal only and not to the next monthly payment. This will limit the amount of interest that accrues.
3. Pay more than the minimum each month
The minimum payment is just a suggestion, and any amount more you can pay a month is going to make a big difference in the long term. Interest is always accruing, so any amount over the minimum that you pay is reducing the overall cost of the loans. Also, any time you are able to make a lump sum payment (because of a bonus, raise, or commission) do it, and it will pay off in spades down the road.
4. Consider jobs that offer loan forgiveness
Certain jobs like public service work, healthcare or teaching might offer part or full student loan forgiveness. All you have to do is meet their requirements and complete the full-time work requirement. If your student loans are holding you back, it might be important to add this to your job search criteria.
5. Avoid repayment programs
If your goal is to pay off your loans as fast as possible, avoid federal repayment programs. The main reason for this is that almost all of the federal student loan repayment programs are geared toward decreasing payments by increasing the term of the loan. In other words, these programs will lead to it taking longer for you to pay off your student loan debts. Don’t fall into this short-term solution trap.
6. Trim your budget
Do you know exactly when you’ll be debt free? Do the math, know the date, and until then, cut out any extra subscriptions, meals out, or unnecessary expenses each month that you can. Remember, this will only be for the short term and the sacrifices you make today will only give you more financial freedom in the future.
Beyond just the “extras” analyze your financial health using the completely free service Status Money, which allows you to compare your finances to your peers who live in the same city as you and have a similar credit score and income level. You’ll be able to see things like if you are paying higher credit card interest than your peers or too much rent, and then adjust your situation.
Every little bit you can trim your budget will help.
7. Get a side hustle
Do you have a side gig or talent that could earn you some extra income on the side? Side gigs come in all different varieties from being a Lyft driver to a dog walker to a part-time babysitter.
No matter where you are in your student loan repayment journey, remember that the sacrifices you make today will pay off in the long run. Trim your budget, work hard to earn extra money and put as much as you can towards your loans to get them paid off fast. Your older self will thank your younger self.
Feature Illustration: Laura Caseley For The Money Manual
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