Student loan debt is climbing year on year, with more graduates leaving the education system in debt. But like anything in life, being proactive can make things easier and having a bit of knowledge on your side can take you a long way. In this guide we will look at how you can pay off student loans fast, before answering many of the questions debtors have about these financially crippling loans.
How to Pay Off Student Loans Fast
If you don’t have the money then there is no magic wand that you can wave to pay off all of your student loan debts just like that. But there are certain things you can do to speed up the process and pay off student loans a little quicker. These include:
- Prioritize your Loans: Debt can change you and make you value your money more. But many Americans who have significant debts will beg, steal and borrow to meet their repayments, and then blow an unexpected lump-sum on a holiday, a car or something equally extravagant and needless. You need to focus your spending on the things that matter first, then focus on your debts, and only then should you start thinking about frivolous spending.
- Make a Lump Sum: A lump sum payment, no matter how small, can reduce those debts significantly. It’s a small gesture now that could save you a lot of trouble down the line. Don’t assume that a lump sum payment of a grand or two will not matter on debts of $50,000 or even $100,000, because it could still save you hundreds if not thousands in interest payments over the long haul.
- Pay More Than the Minimum: As above, an additional payment, no matter how small, could save you the same amount in interest. You can’t pay less than the repayment amount, but you can pay more and doing so will reduce the lifespan of the debt and the interest it accrues.
- Refinance Them: This will allow you to pay off your current student debt and acquire a new one at a better interest rate. It could save you thousands and reduce the term of the loan by months or even years.
Best Way to Pay off Student Loans
The following tips will help you to pay off your student loans easily and quickly, but the emphasis is on making sure they are paid as opposed to trying to get them paid quickly.
- Live off Mom and Dad: As soon as college is over you might be tempted to get your own house. No young adult wants to move back in with their parents if they have just spent years living in college dorms. But shacking up with your parents for a few years will help you to cut out rent and bills, while getting some financial help here and there. You can then use more of your limited income to pay off debts rather than putting it toward those living essentials.
- Build During the Grace: If your loan has a grace period then use it to save money and prepare for those repayments, as opposed to having fun and blowing every cent that comes your way.
- Pay off the Principle While at School: You can make pre-payments at school to reduce the damage those debts do when you leave. But if you do, make sure you are paying off the principle and not the interest. You can confirm this by contacting your advisor.
How to Get Rid of Student Loans
You very rarely get a free meal where loans and debt is concerned. The system is not overly friendly to people who are struggling and it can feel like it just beats you when you are down. But there are exceptions to this somewhat cruel rule, times when you may be able to get rid of your remaining student debt without paying any money:
- If your school violated state laws in order to convince you to join and/or acquire student loans.
- If your school closes while you are a student or within 120 days afterwards.
- You apply for forgiveness. More on that in our FAQ.
- If you are suffering from a disability you may apply for a Total and Permanent Disability Discharge.
Student Loans FAQ
If you still have some questions on how to get rid of student loans, how to pay off student loans or how to acquire them in the first place, take a look at this student loan FAQ.
How Long Does it Take to Pay Off Student Loans?
The average federal student loan term is 10 years, but private loan terms can range from 5 years to 15 years.
When Referring to Student Loans, What is a Grace Period?
For six months after you finish school you will not need to make any payments on your student loans. This is known as a Student Loan Grace Period.
Can you Default on Student Loans?
You can default on your student loans and many millions of Americans do. In the first half of 2017 it was reported that 4 million Americans had defaulted, adding to a further 4.5 million already in default.
A default of this nature can seriously reduce your credit score, so try your best to avoid such an occurrence and if it happens, discuss your options with your lender and do what you can to get back on track. There is a way back from a student loan default if you are willing to make repayment arrangements with your lender and to follow through with these arrangements.
Can Student Loans be Forgiven?
Student loans can be forgiven and there are many programs that offer such forgiveness. Check our guide on the subject of student loan forgiveness for a list of the best programs.
What Happens to Student Loans When You Die?
Federal loans will be cancelled at the time of the borrower’s death. But the same can not be said for private student loans. It seems that the only things as certain as death and taxes are private student loans.
If you have outstanding private loans at the time of your death then the lender will first try to collect them from your estate. If this fails then they will attempt to collect from a co-signer and then from your spouse.
There are exceptions though. They will always attempt to collect from the estate and a co-signer, but some states have laws that forbid them from collecting from a spouse unless they also happen to be a co-signer. There are also private loan policies that exempt the debtor in the event of their demise, so check your policy to see where you stand.
Are Student Loans Worth It?
It’s true that many borrowers spend a significant portion of their adult lives paying off student loans that didn’t seem to do them any good in the first place. But money isn’t a magic ticket that will secure you a great education and a huge paycheck at the end of it. You need to make good decisions and work hard—the onus is on you to make sure that money is not wasted.
Recently, the disparity between college-educated workers and non-college educated workers reached its highest ever, with college degrees accounting for salaries that were 56% higher on average. When you look at it like that, those loans definitely seem to be worth it.