The thought of student loans hanging over your head after college graduation may be overwhelming. You’re more than likely either on the job hunt or just landed your first entry-level position in your new career.
Money probably isn’t exactly flowing and paying down debt early might seem next to impossible. Paying off loans takes time, hard work, and commitment. The good news is, there are a few effective strategies that can help you quickly bring your student loan balance down fast. Today, we’ve got some tips.
Set a budget
This is the number one way to help you get and stay debt-free. It’s critical to know what money you have coming in and what is necessary to pay out. As you establish a budget, cut out any expenses you truly don’t need. This would include things like subscription services, daily Starbucks, and other non-essentials.
Make extra payments
If you come across money you haven’t budgeted for, put this aside with the plan to make as many extra student loan payments as you can. Unexpected money may come from pay raises, job bonuses, extra tips, birthday gifts, tax refunds, or rebates on purchases.
The more you can pay down in the principal of the loan, the less interest you’ll end up paying over the term of the loan. Make sure anything you pay extra is noted as “principal only” so the lender is paying down the principal and not simply crediting you as making early payments – there is a difference.
This takes having a strategy before you even graduate, but it can help you quickly pay off your student loans. The idea here is to save up as much money as you can before your first student loan payment comes due.
- Get a part-time job in college and stash that money away.
- Do gig work or start your own business (e.g. dog walking or landscaping)
- Start a side hustle by selling your talents (e.g. photography, social media management, etc.)
- Sell unwanted belongings on eBay or Craigslist
Anything that brings in extra cash will go a long way towards helping you pay off student loans fast when the time comes.
Refinance the loan
Borrowers who have good or excellent credit often apply to refinance their loans, especially if the terms of the original loan(s) are high. How it works is you apply for a new loan, with better interest rates (this is a must for this plan to work), and then, once approved, use it to pay off the original loan. Then the focus will shift to paying down the new loan, but once better rates are secured, in the long-term a large amount of money is saved.
Keep in mind, refinancing does have its limitations. For instance, once this is done, you no longer have access to federal programs that provide for student loan forgiveness or income-driven repayment. However, weigh this with the ability to save money on the original loan. It may be worth the tradeoff.
Paying off student loans fast can be advantageous to your long-term financial health. In our industry experience, people who can zero out their student loans find it’s easier to move onto new phases of their lives without having to worry about any excess debt hanging over their head. For more financial advice from The Money Man, give the team at Firefighters Credit Union a call now at 608-784-9480.