Tactics You Can Use to Eliminate Student Loan Debt
If you have $60,000 worth of student loans, you got to come up with $60,000 and some interest to pay it off. The simplest thing you can do is start spending less money, so you have extra money to pay off your student loans. I know spending less is not the funniest thing to do, but it’s a temporary sacrifice you got to do. Also you should not be making minimum monthly payments, because you’ll be paying longer than you should on student loans.
If you’re paying $50,000 worth of student loans, and your interest rate is 6%, they’ll recommend that you pay $550 a month. This way, you can pay off your student loans over the next 10 years. Now, if you pay an extra $100 a month, which would be $650 a month. Now you’ll be able to pay off your student loans in 8 years. By doing this you’ll save $3,400 in interest, because the extra $100 that you’re paying goes towards your student loan balance with no additional interest. Now you can use that $3,400 towards something else.
Another thing, stop overpaying on your student loans. In 2019, the Federal Reserve lowered interest rates, so make sure that your interest rate is reasonable. Now, if you’re locked into a high interest rate, you may want to refinance to lower your interest rate.
Stop paying your student loans once a month. There’s a simple tactic that you can use to pay off your student loans faster without even realizing it. Lets go back to the previous example, where you have a $50,000 student loan balance, and you have a 6% interest rate. The recommended monthly payment is $550 a month. What you could do is take $550 and divide it by 2, which is $275. Instead of $550 a month, you’ll pay $275 every two weeks. If you follow this model of paying your student loans, you will pay off your student loan one year sooner, and you will save $1,600 over the course of the loan.
Don’t take out more student loan debt. If you’re done with school, ask yourself, “Is another student loan worth it? Will this extra degree get me a big pay raise, or a small one? Also keep in mind that your interest is front-loaded. During the first year of your student loan, almost half of every dollar you pay is going towards interest. Now, the last year of your student loan, almost every dollar you pay is going towards the principal. So pay extra on your student loan, so you can save extra money over the course of the loan.
