It might be harder on your budget, but higher monthly payments will get rid of your debt quicker. The sooner you pay off debt, the less you’ll pay in interest. Use this amortization calculator to see the breakdown between interest vs. principal payments.
Automate your payments
You can set up automatic payments so that money will be automatically applied to your student loan payment each month. Not only is this convenient, but it can save you money. Most lenders including the Department of Education offer a 0.25% rate discount if you set up auto payments.
3. Negotiate with your employer
It might seem surprising but your employer wants you to pay off student loans quickly too. Many employers like hospitals and other healthcare companies are offering very attractive student loan repayment benefits to dple, one of our clients gets $25,000 per year paid directly to his lender for 5 years.
Terms can vary based on employer, with some like Banner Health, a non-profit system, offering physicians that practice in a rural area $100,000 towards their student debt.
You’d receive this amount provided that you’ve worked for Banner Health for 5 years. If you leave after year one, then you’d only receive $20,000.
Keep in mind that the IRS considers employer loan payments to be taxable income with the exception of $5,250 due to the CARES act. You might have to pay higher taxes and consult your tax professional for further questions.
It also prompted the government to pass the CARES act to help Americans properly manage this crisis. This act offers many benefits like paused RMDs, flexible retirement plan distributions, business funding, protection against eviction, and student loan relief.
Currently, all payments on federal loans including FEEL, Perkins, HEAL and direct have been suspended until . Fortunately, interest won’t accrue during this time. Private loans and those backed by universities like some types of Perkin loans aren’t eligible for these benefits.
These provisions are helpful if you’re struggling to pay your bills. If you have more disposable income, consider using these amounts to make extra payments. Even a few extra payments during this time will let you pay off student loans faster.
Making small payments might not seem like much, but compounding interest can add up over the long term. If you’ve paid all the interest on your loan that has accrued before , then your payment will be applied to the principal. Some other powerful benefits of these suspended payments are that they count towards forgiveness under the PSLF and IDR (Income Driven Plan) repayment plans.
The worst thing that you can do is nothing and avoid decision making. If you want to be successful with finances and life; you must take action. Even small steps are more effective than procrastination.
Don’t be afraid of asking for help as you’d be surprised by how accommodating creditors and employers can be. If you have a positive payment/work history and are easy to communicate with, then most lenders, employers, and other influential parties will want to help you pay off student loans faster!
It might seem daunting when you have to pay $500+ each month for years in order to service your student debt. Luckily, you can establish the proper plan and systems to pay off student loans faster.
You can take advantage of new laws like the CARES act, PSLF, and negotiate with your employer for student debt assistance.
If you have excess cash every month, you may want payday loans online to consider using some of your excess cash to pay off your student loans. Once your student loans are paid off, instead of splurging, you can shift that extra cash to automated savings and invest each month. The last thing you want to do is to forget to record the excess cash and to let it wash down the spending stream when your debt is paid off.