Looking for creative ways to pay off student loans? If you are a doctor, dentist, lawyer or Master of Business Administration (MBA) holder with high federal loan debt, you’re not alone in this predicament.
According to economic research carried out by the Federal Reserve Bank of St Louis, approximately 45.2 million Americans are laden with $1.6 trillion dollars in student loan debt.
That means for every four college professional degree holders, one is repaying their student loan. For most college students, this is not music to the ears, seeing as many wishes to live a debt-free life full of opportunities, but are weighed down with a federal loan debt before even earning their first salary.
The average American student graduates with a student loan totaling $30,000 and more. Being yoked to such a huge debt before your first paycheck is not funny, and you’d want to pay it off. But how to pull this off? How do you pay down student loans without putting life’s goals and opportunities on hold?
#1. Stop buying time to pay off your debt.
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A federal loan can pin your life down and that’s nothing worth writing home about. So the best way is to never wait to pay. Just pay it off as soon as you get the chance. This way your loan never increases and you are at peace with yourself. Here some tips to keep in mind:
- Federal loans provide borrowers a grace period to pay off their loans.
- During this period, loan interest rates never accrue giving you more time to pay it off without any additional costs.
- It’s at this period that most people never attempt (or shows any signs) to pay off little amounts of money to offset their loan.
In fact, many don’t take up the initiative to pay anything, and that’s where the problem lies. A prudent move to clear your debt is to pay little amounts as low as $20 monthly to offset your loan's interest first then work on reducing the principal amount as time progresses, and you’ll buy yourself repayment time.
#2. Check on a loan repayment term.
The idea is to clear off your loan as soon as possible, but this goal is far-fetched if you don’t consider the repayment plans of your high student loan debt.
Most repayment plans are designed to make broke students repay loans within shorter periods of time even while paying more monthly interest rates than they can handle over the given period.
This birthed income-based repayment plans (IBR) to assist students to repay their student loan debts fast beyond the usual 10-year repayment plan. IBR offers reprieve in the form of extending repayment terms on a student loan while lowering monthly interest rates.
If you’re employed and have an income, department of education will provide you loan repayment plans based on your current income. This repayment plan provides you options of making low payments on over a given period of time. While this is a prudent move, it slows your loans pay off time.
If you are unable to make minimum payments on your student loan then consider an income-driven repayment plan by all means. Otherwise, it is ideal to save money and pay off your federal loan faster.
#3. Get employed in the public service.
If you are weighed down with a huge student loan, the best way to clear it off is through seeking a career in the public service. According to the public service loan forgiveness program, a student laden with a huge loan balance can have it scrapped off if they make 10-year payments at once.
If you are a professional degree holder that took up several loans to complete their education this option provides a faster way to take care of your federal loans. And that’s the goal you want to achieve.
You can also have your debt taken care off when working under service programs or education grants that offer loan forgiveness programs, and there are many. Find the right one that suits you.
#4. Have your monthly payments deducted automatically.
Perhaps the easiest way to pay off your student debt loan fast is to have it automatically deducted the minute your paycheck hits your bank account every month. This saves you time to offset our extra funds and not give it much thought as the repayment is done automatically. It doesn’t require your input at all.
For some reason, this option comes with an added advantage as many lenders will have a reduction of 0.25% interest rates taken away from your federal loan. So enrolling in automatic repayments plans is not only ideal for you but also saves you planning time and money (you’d pay as extra interest rates)
#5. Make timely payments before the given time.
Waiting for the due date to elapse before making payments is not advisable or any wiser. It only works against the borrower since it carries no advantage as opposed to paying before the due date.
Always make timely payments before the specific given date to enjoy reduced interest rates and a fast reduction of the principal amount you initially borrowed.
Remember federal loan’s interest rates are calculated on a daily basis so the more you make timely payments (before the due date) the better for you. If you are unsure of how much you are needed to repay back, use a repayment estimate calculator.
#6. Make payments every two weeks.
Handling tasks get easier if you split the tasks into small manageable tasks. The same applies to your loan payments. Make loan payments easier by dividing (into two) your monthly payments into weekly or bi-weekly payments by automating student loan payments. This a simple yet overlooked way to get out loan debt faster.
Take, for example, a student loan of $40,000. To offset this loan you need to pay $400 for ten years to complete it. But if the $400 can be divided into a manageable amount of $200 that you can pay every two weeks, you’d easily reduce your interest rates and repayment period, to your advantage.
There are many other ways to get out federal loans including having your employer help you pay tuition fees as well as consolidating your loans to a lower interest rate. Also, if you have a private student loan, it is important to employ the aforesaid ways to get of debt faster.
It’s no secret that professional degree holders are among the many people in the U.S. heavily burdened with student loans (a good chunk owes their parents as well). With a good strategy up your sleeve and hard work on what best practices to employ, it is easier to get off the chains of these loans, for good.