You Can Lower Your Debt
If youre planning on buying a home or new car, your debt-to-income ratio is important to lenders. Its how much you have in debt relative to your monthly gross income.
For example, if you made $40,000 per year and had $500 in student loan payments, a $250 car payment, and $1,000 rent, your DTI would be 53%.
In general, lenders want to see a DTI ratio of 43% or less. If you have large student loan payments, that can cause your DTI ratio to be over that limit and will keep you from qualifying for a loan.
How To Pay Off Student Loans Fast In 20 Ways
This article will help you with ideas on how to pay off student loans fast.
Many students and former students are in debt because of student loans, but the good news is that there are specific steps you can take to pay off your loan fast.
I will outline some simple steps for you to follow to make paying off student loans fast.
Your goals are below, but feel free to modify them as necessary:
Your Guide To Paying Off Student Loans Faster
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Stay Motivated And Youll Destroy Your Student Loan Debt Asap
Look, Im not here to beat you up because you took out student loans in the past. I aint no bully. But I do want you to experience the power of living debt-free. Theres no need to drag out your student loan payments for the next five, 10 or even 20 years. When your money doesnt have Sallie Maes name on it every month, you can do so much more with it. Just think about how many Beefy Fritos Burritos that freed up money could buy!
If you’re ready to dump your student loan debt once and for all, then check out The Ultimate Guide to Getting Rid of Student Loan Debt. This video course walks you through the proven plan to pay off your student loans faster than any payment plan your lender is pushing you toward . See you later, student loan debt!
Remember, the only magic in this is you and how hard youre willing to work. But its totally worth it. Youre worth it. Keep fighting the good fight .
Guide to Getting Rid of Your Student Loans
Sick and tired of your student loans? Learn how to ditch them for good with this in-depth guide!
About the author
George Kamel
Student Loan Debt Can Be A Burden But You Have Several Ways To Pay Off Your Student Debt Efficiently And Save Money
If you want to get out of student loan debt but dont have the money to pay your student loans in full, these 7 ways can help you pay off your loans faster.
Worried about graduating with student loan debt? Youre not alone. Students graduating with a bachelors degree from a public college or university borrowed $26,100 in student loans on average, according to the National Center for Education Statistics. That figure is even higher for students at private nonprofit and for-profit institutions.
The good news is that its possible to pay off your student loans and save money.
Student loan refinancing could be one option to help you pay off your loans faster. You can learn more about student loan refinancing by visiting Credible, where you can compare rates from multiple private student loan lenders.
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Our loans reporters and editors focus on the points consumers care about most the different types of lending options, the best rates, the best lenders, how to pay off debt and more so you can feel confident when investing your money.
Establish A College Repayment Fund
If youre not sure how much more you can devote to your student loans every month, set up automatic transfers to a separate savings account specifically for college debt. Transferring money automatically into savings is effective because you wont be able to spend it on something nonessential like clothes or dining out.
Just make sure to set up a separate account for paying back your college debt. Dont use a checking or savings account you already have, because you might be tempted to use that money for something other than your student loans. Compare savings accounts and put your money in a high-yield savings account to maximize your returns.
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What If I’m Going To Grad School
For students who are going straight from undergrad to graduate school, and taking out loans for grad school, too, you have two options:
1) While you’re in school, your loans will be in what’s called student deferment. That means you have the option, while you’re in grad school, to defer those undergraduates loans and wait to start paying them off after you’re done with grad school.
2) You can also choose to waive that deferment while you’re in school and start tackling that debt as soon as possible.
“You can start paying on those undergraduate loans while you’re getting your graduate degree and be on a payment plan and be rocking and rolling,” Williams said.
Strategy : Prioritize The Loan With The Highest Interest Rate
If you want to maximize your savings when paying off student loans, start with the one that has the highest interest rate. Federal student loans come with fixed rates set by the government. Private lenders set interest rates based on your credit and other factors, and theyre often higher. Commit to tackling your loan with the highest interest rate first.
By paying off the loan with the highest interest rate, you reduce the amount of interest youll pay on the loan beyond the principal balance. This is called the debt avalanchemethod, and its a good option if you want to pay the least amount of money in the long run.
For example, if you had a $12,000 student loan at 5% interest and paid it off over 10 years, youd pay $3,273 in interest for a total payment of $15,273. If you made enough extra payments to pay that same loan off in seven years, youd only pay $2,247 in interest a savings of $1,026.
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Understand Interest To Avoid Capitalization
Interest and capitalization make the amount of money you borrow bigger. Understanding how this works is important.
Interest is the cost of borrowing money. It begins to build up as soon as you get your loan funds. The amount of interest you pay depends on many factors.
- The amount of money you borrow the more you borrow, the more interest you’ll pay.
- The rate at which interest is charged the lower your interest rate, the less interest you’ll pay.
- The length of time it takes you to repay the loanthe sooner you repay your loan, the less interest you’ll pay.
Whether or not the government helps pay the interest depends on whether your loan is subsidized or unsubsidized.
The interest rate on your private student loans is set by your lender while the interest rate on your federal student loans is set by Congress as part of the Higher Education Act. You can learn more about interest rates and fees from Federal Student Aid.
Increase Your Income With A Side Hustle
If your biggest problem is income, pick up a part-time job on the nights or weekends so you can stack cash quickly. Then toss that extra cash directly at your student loan debt! There are a ton of side hustle options out thereeverything from driving an Uber and delivering food to walking dogs and house-sitting. When I was paying off my student loans, I drove for Lyft and Uber and did freelance marketing work to pay those bad boys off even faster.
And dont hit me with the I dont have time for another job excuse. If you have time to hang out with your friends, scroll Instagram, or watch Netflix, you have time to make a few extra bucks.
Remember, the extra job wont last forever. Youre just trying to get intense and kick that student loan debt out of your life so you can move on with your life.
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Paying Off Your Student Loans Faster Will Save You Money On Interest Here Are Five Strategies You Can Use To Pay Off Student Loan Debt Quickly
You can pay student loan debt off sooner by paying more than the minimum and refinancing. Heres how to pay off student loans faster.
Living with student loan debt can be stressful. It puts a strain on your budget and can keep you from reaching your financial goals, like buying a house or saving for retirement. But its possible to pay off your student loans quickly.
The sooner you pay off your student loan debt, the less interest youll pay over the life of the loan. And removing student loan stress from your life can also boost your mental health.
Refinancing is one option for paying down student loan debt faster. Visit Credible to learn more about student loan refinancing and compare rates from multiple private student loan lenders.
How Long Does It Take To Pay Off Student Loans
If you are a student who graduated with a federal loan the most common repayment timeline is known as the Standard Repayment Plan and is 10 years.
However, you can adjust the plan if you need a more flexible schedule.
Federal student loans offer three different repayment plans:
- Standard Repayment Plan: You repay a fixed monthly amount for 10 years*.
- Graduated Repayment Plan: Monthly payments start out low and increase gradually over time. The increases are typically every two years. Payments are completed in 10 years*.
- Extended Repayment Plan: Graduated or fixed payments for 25 years.
*Up to 30 years if you have a Direct Consolidation Loan.
Private student loans will have different repayment terms, depending on each lender. Typically, private student loans are repaid within five to 20 years.
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Use These 10 Strategies To Pay Off Student Loans Fast
Figuring out how to quickly pay off your student loans can be rewarding. This article will help you understand your options.
Christy Rakoczy Bieber
Being in debt is never fun, especially if you graduate with a lot of education loans. As a result, you may want to explore options for how to pay off student loans fast so you can get free of this financial burden.
The good news is, there are lots of techniques you can employ for faster repayment. In fact, here are 10 steps you can take to become debt-free ASAP.
Take Interest Rate Reductions
Effectiveness level: Low
While you can cut down on the cost of your student loans and get some big wins with the strategies above, smaller savings can add up, too. One of them is the interest deduction from signing up for automatic payments.
Many servicers offer a 0.25% interest rate deduction on federal student loans for enrolling in automatic payments. While this isnt a ton of money, its not bad to get a few bucks back.
Besides the interest savings, automatic payments can be a good idea to make life easier. By setting up automatic payments, you dont have to worry about late or missed payments when paying back student loans . Plus, you can use automatic payments in conjunction with other strategies on this list, like making payments higher than the minimum.
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Explore Federal Repayment Plan Options
Finally, when youre trying to pay off student loans quickly, its helpful to understand federal repayment plan options, including:
- Standard Repayment Plan. Has fixed payments and allows you to repay your loans in 10 years.
- Graduated Repayment Plan. Allows you to start with lower payments that gradually increase as your income rises.
- Extended Repayment Plan. Is available for certain borrowers and allows you to repay your loans over a long time period.
- Income-Driven Repayment Plans. Cap payments at a percentage of monthly income. Learn more here.
The standard repayment plan allows you to pay off your debt more quickly, so it may be the best choice if that is your goal.
But, if youre trying to pay off private loans first, you may want to opt for a plan that allows lower monthly payments such as a graduated plan so you have more cash to put toward private loans. Once your private student debt is paid, you can switch back to the standard plan and increase your payments to get those federal loans paid.
How Can I Pay Off My Student Loans In 3 Years
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Visualize The Future Without Student Loans
Effectiveness level: Low
While this isnt exactly a repayment strategy, it can help you find motivation to get rid of your debt, especially if its causing a lot of stress in your life.
Heres an easy way to start your visualization. Think of the one thing you hate most about having student loans. Maybe its that you cant afford to go on a vacation, or maybe you have to eat rice and beans to scrape together enough money to pay your bills. Perhaps you drive a crappy car that breaks down all the time.
Now close your eyes and imagine what your life would be like if that No. 1 most hated thing were no longer a problem because you dont have student loans. How would your life change for the better? Would you be happier? What would you do without having to worry about student loans?
Is this a life you want to have? With enough hard work, getting rid of your student debt can become reality. Now go get it!
Pros Of Paying Off Student Loans Early
- Reach other financial goals sooner. By paying off your student loans quickly, youll be able to put more of your focus into things like retirement, homeownership and savings.
- Improve your debt-to-income ratio. Getting rid of a loan lowers the amount of debt you have relative to your income, which will help you qualify for other funding, like a mortgage or credit cards.
- Pay less interest over the life of the loan. The less time you spend repaying your loans, the less interest you pay on them. By paying off your loans early, you can easily reduce the overall cost of your loans by hundreds of dollars.
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Understand How Your Student Loan Debt Will Affect Your Future
If you havent started repaying your college loans yet, it can be hard to imagine how they could impact your income and lifestyle. Are you going to be able to make enough money to cover your loan payments and support everyday living expenses?
Youll get some ideas about repaying your student loans by looking at a student loan repayment calculator like 1st Financial Bank USA’s Student Loan Repayment and Affordability Calculator. Student loan repayment calculators show your estimated loan payments based on your interest rate and term length of the loan. These calculators help you determine how much of your future salary will go toward your loan payments, and can give you an excellent reality check, preventing you from over-borrowing in college.
