According to the Education Data Initiative, an average student takes 20 years to repay their student loans. Some professional graduates take up to 45 years and 21% of borrowers get a 5% increase in their student loans.
It’s overwhelming to think that after your college or university studies, you have the burden of debt, which can derail you. For example, it can be trickier to buy a house before you clear your debt. While some people qualify for “forgiveness”, many carry the debt report until they complete repayment.
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How can you fast-track your repayment? That’s what we are exploring in this post.
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Know Your Total Debt
The first thing you ought to do is find out how much you owe the government. Find out the type of debt you have since student loans have different classifications, for example, direct subsidized loans and direct unsubsidized loans. This is the only way you’ll be able to create an effective repayment plan.
Understand the Terms of Payment
Each student loan has its terms of payment. It’s important to know these so that you do the right thing, and understand how defaulting will affect you, and the frequency of payment, among other things. It will also help you to select a plan that avoids interests and penalties.
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Evaluate the Grace Period
The grace period is the time you have before repaying your student loans. Every loan has its grace period. Go through this so you can explore your work options and how much you need before it expires.
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Consider Student Loan Forgiveness
The Education Data Initiative states that 18.4% of students eligible for forgiveness apply. Some circumstances that warrant forgiveness include bankruptcy, complete disability, or when your school closes before you finish your degree. It’s worth exploring to check if you can apply. If you have a federal loan, you can check the Public Service Loan Forgiveness.
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Consolidate Your Loans
Consolidating your loans will reduce the debts you’re repaying and get an extended period on your payments. However, you might pay higher interest rates and lose some student loan benefits. Before you consolidate your loans, read the terms and conditions carefully.
Make Automatic Payments
You can have a certain percentage cut off from your pay every month to pay your loans. This is possible if you have a federal student loan. This will curb any possibility of redirecting your funds to other purposes. Decide how much you can part with monthly and set it up.
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Do a Part-Time Job while in College
Taking a part-time job while in college enables you to save up money to repay your debt. Additionally, you can pay a large part of your fee and take less debt. Starting a side hustle is a money-making strategy that helps you to save.
Have a Budget
You need a budget for daily expenses and more so when repaying a debt. The last thing you want is to pay your debt without your plan. You won’t know where to spend your money if you don’t dedicate it to specific items. This also helps you to assess your spending habits and cut out unnecessary expenditures.
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Go for Tax Deductions
The government gives student loan interest deductions on your taxes to all individuals who pay interest on qualified loans throughout the year. This can significantly shrink your loan and take you closer to your goal of paying off your debt. Claim this tax deduction if you pay interest on qualified loans.
Debt Avalanche Strategy
This is paying off large amounts of your principal payments to reduce the payoff in the long run. This leads to a reduction of the payment period and the amount of interest accrued.
Paying student loans isn’t easy and sets you back years. You could have been investing in other areas of your life, buying a home and other properties. However, we hope you find these tips useful and help you to complete your payments sooner. Are you currently repaying your student loans or have you finished? Share your experience in the comments section.
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