How You Can Repay Your Student Loans Faster
Did you know that Americans today owe nearly $1.5 trillion in student debt? There are roughly 44 million borrowers paying some form of interest on these loans. In 2017, the average student debt for a recent college graduate was a whopping $39,400, and that was for an undergraduate degree. Even with a grace period for student loans, you will eventually have to allocate part of your earnings each month to paying them down or you will simply accrue more interest. As you can see, if you are currently in repayment, you are not alone in this burden. There are millions of people going through the same hardship.
You should have a worksheet with all of your loan information. You can list the name, amount, interest rate and repayment dates. You should also know if they are federal or private loans, as well as if they are subsidized or unsubsidized. You do have a grace period of six months for federal student loans, in which you don't have to start repayment.
If you have the option of consolidating your federal loans into one payment, you can take this opportunity to negotiate with your provider and get the best payment plan based on your level of income. You may be able to refinance to a lower interest rate and decrease your monthly payments. However, it's best to consolidate with the federal issuer so that you can still receive tax breaks.
Pay More Than the MinimumIf you have an extra $25 or $50 that you can allocate to your loan payments each month, you should seize the opportunity. Over time, the interest capitalizes into your principal balance, and can really add up if you extend deferment or miss payments. If you look at your budget and see areas where you are overspending, then quickly throttle back on your spending and apply it to your student loans instead. This will go a long way towards financial independence in the future.
Pick Up a Side Hustle
You may not like the idea of another job, but there are plenty of ways to earn money with online jobs, freelance work, ride-sharing and much more. You can supplement your income by doing Uber, Lyft or Poshmark. These help you pay down your debt faster.
Interest Deduction on Your Taxes
You can file for tax deductions and credits if you are paying down your student loans. There is an interest tax deduction that allows you to reduce your taxable income by up to $2,500 based on the interest you have paid on your student loans for that filing year. Always make sure to consult with an accountant or tax professional to better understand your options.
Choose the Right Repayment Plan
There are several options for repaying your federal student loans, but most of them are based on your income. If you have an increase in income, your payment may increase as well. This is a good thing as it allows you to repay faster, but if you are worried about money, then you may want a graduated repayment schedule that starts off with smaller payments and slowly increases over time. Income tends to grow with years of experience, and a higher income can make higher monthly debt repayments a bit more palatable.