If you’re one of the 44 million Americans who have student loans, it may seem like you’ll never be able to pay it off. It can be an insurmountable amount of money totaling in the tens of thousands of dollars. The average amount of student loan debt Americans have is around $28,000. That will take them as long as 10, even 20 years to pay off.
This is causing a lot of problems and so many people’s lives. It even impacts the economy as it prevents young people from making major life decisions. It’s making them decide to put off getting married, having children, buying a car, or even getting a mortgage. There unable to buy health insurance or save for retirement.
The impact of the $1.53 trillion owed was going to be felt for a very long time. The economy might be thriving right now, but having this much debt as caused major recessions in the past. At some point, the bubble might burst. And while many people are sitting around and waiting for politicians to create a fix, there are things you can do right now to help yourself.
Here are five tips for paying off your student loans faster:
1) Don’t Just Pay the Minimum Balance
The minimum balances there for a reason. If you could pay less, then of course you would. At that point, it would take even longer for you to pay off your debt. We definitely would like to have more money in our pockets, but that’s not going to happen until we pay off our debt. That debt is going to stick with us until it’s paid off. You cannot declare bankruptcy and get rid of this debt. By avoiding it, you’re only making the situation worse in your life. Instead, take responsibility for your debt. Pay it off as quickly as possible. That’ll actually lower the interest will be expected to pay for the lifetime of your debt. Interest alone can add thousands to your total, so limiting that while paying it off quicker will help you in the long run.
2) Set a Payoff Date for Motivation
Whether you decide you’re going to pay more than the minimum balance each month, do a little bit of math and figure out exactly the date when you finish paying off your debt. Use that data as motivation moving forward. Might even think that the date is too far off and make the wise choice to beat the date and pay it off sooner.
3) Check into Refinancing
Listen, if you’ve had your debt for a while and you’ve had a great track record of paying it off without taking on more debt, you could get your debt refinanced. When you graduated college, you probably didn’t have a great credit score. That means monthly payments or higher, as is the interest you’ll be expected to pay. But if you improved your credit score, that will certainly help you to refinance and get a lower interest and monthly payment. Lower interest means you’ll pay it off sooner.
4) Check Out How Each Payment is Applied
When you make monthly payments, you might think every dollar is going toward your loan. It’s not. This is how the lenders make their money. A big chunk of your payment goes towards the interest, not the principal. That means you’re paying off your student debt even slower than you realize. This is why it’s important to pay more each month, as the more you pay, the more you’ll pay down the principal amount.
5) Avoid Forbearances
There may come a time when you think the best course of action is to get a forbearance. Forbearance will allow you to hold off on making payments for certain time without impacting your credit score or putting you into default. While there may come a time when you desperately need a forbearance, it’s never a good idea, especially if you do it for a long period of time. Even while you’re on forbearance, your debt will still collect interest and grow during that time. Always pay something, even if things are financially tight.
