At AfterSchoolAfrica, our goal is to assist you in making better education and financial decisions. Repaying your student loan debt can take decades and can feel overwhelming. While the average student borrower takes 20 years to repay their debt, the standard federal student loan repayment term is 10 years. However, that need not be the case. There are numerous ways to reduce this repayment period and pay off debt more quickly. The top strategies for repaying your student loans are listed below.
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1. Set up automatic payments.
Applying any extra cash at the end of the month to your student loans might be alluring. However, this might mean reducing the speed at which you make payments if your finances are tight and you don’t typically have extra money at the end of the month.
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If you’re not sure how much more you can afford to pay each month toward your student loans, take a look at your budget to see how much you can afford.
Next, program automatic payments to be made on the first of each month. You won’t inadvertently spend that money that way. When determining how much to pay, use caution to prevent overstretching your budget.
2. Get a part-time job while in college to help pay off debt.
One strategy to manage your college debt is to work a part-time job while you’re a student. You can use the money you make from the job to lower your initial loan amount and simplify your repayment schedule. For the 2023–2024 academic year, your income can be up to $7,600 without compromising your eligibility for need-based financial aid.
To find out if your school is hiring for any on-campus positions, check out the career center or resources section. Jobs on campus typically have a greater tolerance for odd or hectic class schedules. There are more online jobs than ever before, so you have even more options to fit your skill set and schedule. Between academic years, you can work summer jobs to increase your income.
Getting a side hustle is yet another way to reduce your student loan debt. Opportunities for side gigs have proliferated recently, and they can be more convenient for college students because they can be completed on their own schedule rather than according to a rigid one set by an employer.
3. Stick to a budget.
It can be simpler to know where to make savings and reallocate those funds toward your student loans if you plan and understand your monthly cash flow.
Therefore, evaluate your ability to stick to a budget and your spending patterns. Use a student budget calculator if you struggle to stick to your spending plan. It will help you start and stay on track.
4. Consider refinancing.
By securing a lower interest rate, a shorter repayment term, or both, refinancing your student loans may help you in repaying your student loan quickly.
Keep in mind that unless you’ve managed to establish a strong credit history or you have a creditworthy co-signer, this option might not be available immediately after you graduate. If not, building your credit history and fulfilling the requirements of refinance lenders may take some time. To be eligible, many lenders also need a history of employment or a steady income.
Certain benefits, such as income-driven repayment plans and student loan forgiveness programs, are not available to you if you refinance federal student loans.
Compare rates from a few lenders before refinancing to determine which one offers you the best value. A student loan refinance calculator can also be used to analyze the numbers and determine if it’s the best course of action.
5. Lower your interest rate through discounts.
If you set up automatic payments on your loan, most lenders will give you a 0.25 percent discount; some may even give you a 0.50 percent discount if you have a relationship with them.
Additionally, if you meet specific requirements, such as making a certain number of on-time payments or taking out another loan with the same company, private lenders may offer interest rate discounts. Speak with your lender about interest rate reductions and discounts if you have private student loans.
6. Ask your employer to assist you in repaying your student loan.
Many employers now provide tuition reimbursement or help with student loan repayment. For employees who enroll in degree programs within a specific network of courses and universities, some employers—like Starbucks and Walmart—even provide free college education.
Through 2025, employers may pay up to $5,000 a year toward an employee’s college expenses or help with student loan repayment. One important benefit for employees who are continuing to work and pursue higher education at the same time is that this benefit is not taxable income.
Everyone wins because employers are also able to deduct the cost. To find out what options your company offers for loan repayment or tuition assistance, check your employee handbook or get in touch with HR.
The pros of Repaying your student loans early
- Achieve additional financial objectives more quickly. You’ll be able to devote more of your attention to things like retirement, homeownership, and savings if you pay off your student loans quickly.
- Boost the ratio of your debt to income. Reducing your debt with your income by paying off a loan will make it easier for you to be approved for other loans, such as credit cards or a mortgage.
- Lower interest throughout the loan. You pay less interest the quicker you pay back your loans. You can easily save hundreds of dollars on your total loan costs by paying off your debt early.
The cons of repaying your student loans early
- Might no longer be qualified for loan forgiveness. Whether you’re pursuing public service loan forgiveness or an income-driven repayment plan, paying off your loan in full or making additional payments will lower the amount that will be forgiven.
- May lose out on gains in the stock market. You may miss out on profits if you choose to make extra payments on your student loans rather than investing for retirement and other long-term objectives. In certain cases, you might be able to invest and earn a higher return than you would from early loan repayment. However, there are risks associated with investing.
- Draws attention away from other types of debt. If you have other high-interest debts, it might not be worth it to pay off your student loans early. For example, it makes more sense to apply extra payments to a credit card balance with a 16 percent interest rate than to a student loan with a 5 percent interest rate.
What happens when you don’t Repay your student loan on time?
- Your loan goes into delinquency the day after you miss a payment deadline.
- Your loan will eventually go into default if you don’t make the payments as agreed. This happens for federal loans after 270 days, or roughly nine months. If you miss three monthly payments or 90 days of payments, your private student loans may go into default.
- Your credit report will contain a default note. This will typically result in a decrease in your credit score.
- The lender may bring legal action against you to recoup the debt after your loan is in default. This is so because student loans are considered unsecured debt, which means that no property, like a house or automobile, can be repossessed.
- Defaulting on a federal student loan may result in further repercussions. Your eligibility for any federal student aid will be terminated. Your wages, Social Security benefits, and federal tax returns may be garnished.
- Generally speaking, though, there are other ways to escape default. Get in contact with your loan servicer right away to find out your options if you are having trouble making your student loan payments. Reputable lenders will want to cooperate with you in order to assist you in escaping default.
- Rehabilitation and consolidation are provided by federal loans.
- Private lenders could be open to working out a deal with you.
The bottom line
Student loan debt can be a significant financial burden, but there are steps you can take repaying your student loan quickly, and you don’t need a high salary to do it. Some are widely available, like automatic payments, while others require a particular job or financial situation.
When considering how to pay off student loans quickly, determine the best approach for your finances and personal goals.
Read Also:
Step-by-Step Guide to Applying for a Student Loan
Success Stories: How Student Loans Transformed Lives
11 Student Loan Terms and Conditions that you need to understand
