Six Ways to Pay Off Your Student Loans Faster | Molly’s Money
If this is your first time here, Molly’s Money is a series I write on this blog that includes all things personal finance. Got a question about money that you want answered? Leave it in the comments below or email me!
One of the most common forms of debt is the oh-so-lovely student loan debt. It’s also one of the things I get emailed most often about, “How do I pay off my student loan debt faster?” Student loan debt is often treated very differently than credit card debt, or a car payment, or even a mortgage. It’s often a whole ‘nother animal of debt altogether.
Whether it’s a bank loan or a government loan or a subsidized loan or an unsubsidized loan – at the end of the day – it’s still a loan and it’s still a huge pain in the rear to pay off. It can also be really overwhelming and feel really daunting when you graduate college or grad school or medical school or whathaveyou and you immediately have this giant mound of thousands and thousands of dollars of student loan debt staring you in the face.
So, today’s I’m giving you just a few tips and tricks for paying off your student loan debt faster! (Remember, these are not the be-all end-all of tips…)
Six Ways to Pay Off Your Student Loans Faster
1. Pay 10% extra each month. I realize this may seem fairly self-explanatory, but so often people don’t think to do this. They think they only have to pay the minimum amount due each month. Well, you CAN and you SHOULD pay more each month. A good rule of thumb is 10% extra each month. So, if you have $150 a month you are paying towards your student loans, try paying $165 each month instead. That’s only $15 extra dollars each month and over time, it really adds up and you can knock a few YEARS off your payment schedule if you do that. Think about it, $15 is just not going to Starbucks three days each month. Or not eating at Chipotle once. Or walking to the store instead of driving.
If 10% seems like a lot to you, just try small with 5% or something like that. If you are interested, you can use this Student Loan Calculator to try entering different amounts to see what your payoff schedule would look like if you paid extra each month.
2. Use a bonus at work or your tax refund to pay off loans. I know when you get extra cash in your pockets from a bonus or a tax refund, it can be SO tempting to take that money and put it towards something fun like a vacation or shopping or a night on the town. But, instead, take the WHOLE thing and put it towards paying off your student loans. The more you do that, the sooner you’ll be done with the loans and you WILL be able to enjoy the bonuses and refunds later in life.
3. Sell stuff! Do you own anything of value? Sell it! Clean out your closet and take stuff to consignment stores, Plato’s Closet, Clothes Mentor, or other cash-on-the-spot places. There are also great places online like eBay, Poshmark, or ThreadUp where you can sell your clothes and accessories. What about your car? Maybe sell your car and downsize to something cheap… take the money you’ve made and throw it at your loans! You will really be surprised how quickly it adds up and how easily you’ll be able to pay off loans sooner this way.
4. Get an extra job. Pick up a part-time job nights or weekends and take those paychecks and use that money ONLY for student loan payoff. Consider that job to be your job that you’re working off your education for. Work retail at the mall, wait tables a few nights a week, or even babysit for friends. Every single penny you earn from that extra job should go RIGHT to your loans.
5. Consolidate loans. This should be done carefully, but can be really helpful. DO NOT consolidate a low interest rate loan to a higher interest rate consolidated loan.
6. Ask your employer to help you out. MANY companies will offer to help pay off your student loans if you agree to work for them for a certain number of years or provide another assistance to the company. This may not work for everyone, but once you have a good standing with your employer, it can’t hurt to sit down with your boss and say, “I have some student loan debt that I’d like to pay off. Can you help me? What plans can you offer me? I will do “x” in exchange for student loan forgiveness, etc…” You can also ask for bonuses or raises to go towards student loans. The worst they can say is no!
Now, what about you? Do you have any tips or tricks for paying off student loans faster? Share them in the comments!
You could add to the list that if you happen to work in education federal student loans will be forgiven up to $17,500 if you work in a low income school with special education students for 5 full years. Also, teaching abroad in an Asian country is a great way to pay off debt as your housing is paid for and living costs are super low! 🙂
We actually refinanced our then condo and took out the extra money to pay off my student loans and car because the mortgage rate was WAY lower than my student loans and car loan, crazy right? But totally agree with all that you said to pay off the debt!
Love those ideas!! I’ve used almost all of them to pay off 100k 🙂 Another idea that I used is entrepreneurial endeavors 🙂 My husband traveled and played bass (like guitar), we wrote a book together, and used money that we received as gifts 🙂
This is awesome, Molly! Great tips. I paid off almost all of my credit cards by just paying a little extra over my minimum every month…and I’m trying to contribute to paying off my husband’s loans by making my “extra job” income (aka any kind of portraits, or album income separate from my “regular” wedding jobs) solely for loan repayment.
that is AWESOME, katie!!!! you are rocking it!
I know that once I enrolled in autopay for my student loans, it knocked down my interest percentage. It wasn’t much, but anything helps!!
I pay extra per month on the loan with the highest interest rate first and minimum payments on the rest. Once the one I’m paying extra on is paid off, I move to the next highest interest rate one.
Something I want to reinforce – it’s so important to know everything you can about your loan and how the bank handles things like paying more than your monthly payment.
For example, I learned this the hard way just yesterday, if you make your monthly payment, then decide to make a second extra payment toward your loan your bank may not see that as an “extra” payment and instead may credit it toward your next monthly payment(s). If you want to pay more than your minimum monthly payment you may need to stop automatic payments so you can customize how much you pay each month based on the amount of extra money you have to pay toward your loan that month.
OR if you want to make a second payment in addition to your monthly payment you may need to tell the bank you are making a “principal only” payment which applies that money toward the balance of your loan (excluding interest and fees) instead of rolling over to the next month’s minimum. BUT this is where my point about knowing everything you can about your loan becomes important because some banks will actually charge you a fee for making a principal only payment. Heaven forbid you pay off that loan ahead of time! If you know your bank will do that then you should stick to increasing your monthly payments and just set aside any extra money you come up with during the month until it’s time to make another payment.
My point is just that you need to be proactive in arming yourself with the information you need to make sure you are successful in your efforts instead of hoping your loan provider will tell you everything you need to know. It sounds so basic to say it that way but sometimes I forget to ask questions and seek clarification, especially when I’m overwhelmed as I sometimes feel when dealing with finances.
that is so right, Kate! thank you so much for sharing your experience!!
My husband and I have 5 college degrees between us. Needless to say, we racked up a ton of student loan debt. We completed our graduate degrees when we were married, and we lived very frugally, which helped a lot! We consolidated his loans separate from my loans (never consolidate a married couple’s loans). Then we put them both on an auto payment which was taken directly from our accounts every month. This was a huge help! Thanks for the other tips! Susan