When trying to pay off student loans, there are a few ways to whittle down your balance.
The more you pay toward your loans, the less you’ll owe, and the quicker your balance will vanish. Extra payments can help pay off student loans quicker, but refinancing may also be an option to pay off loans.
Most loan servicers have a student loan payoff calculator that can be useful when determining how much interest you’ll save if you pay off loans earlier.
Refinance if you have a steady job and good credit
Refinancing your student loans can help you pay them off quicker without having to make additional payments. By refinancing, multiple student loans can be combined into a lower the interest rate.
If you want to speed up your loan repayment, a choosing a new loan term may shorten the length of time of the loan. Refinancing at a lower interest rate could cut thousands of dollars off your loan.
Make any extra payments count
While there isn’t a penalty for paying off student loans early, or paying more than the minimum amount required, student loan servicers often apply the extra amount to the next month’s payment unless instructed differently.
Instruct your loan servicer to apply overpayments to the balance. This can be done by phone, online or by mail with most servicers. This can save you a lot of money.
Make biweekly payments
Making biweekly payments, is a secret way to pay extra toward your student loan. Biweekly payments are replacing your one full monthly payment with payments every two weeks.
Biweekly payments result in an extra payment each year, which will reduce time off your repayment schedule and save money from interest you won’t be paying.
Enroll in an autopay program
Signing up for autopay is another way you can lower your interest loan’s interest rate. Servicers of federal student loans offer a quarter-point interest rate discount if payments are automatically deducted.
Many private lenders also offer autopay deductions. Although the savings is usually only 0.25%, it is still a savings of extra money off your loan, allowing you to pay it off sooner.
Stick to the standard repayment plan
Federal loans are automatically put on a 10-year repayment timeline, unless you choose a different option. If you are unable to make large extra payments, the quickest way to pay off federal loans is to remain on the standard repayment plan.
Federal loans also offer income-driven repayment plans, which can be lengthened to 20 or 25 years. Loans can also be consolidated which can lengthen student loan repayment to a maximum of 30 years, based on the balance.
Sticking to the standard payment plan is a quicker way to becoming debt-free.