Whether you've graduated from university or you're heading off to college soon, there's a good chance that you will feel the impact of student loans. The cost of a four-year degree continues to rise, leaving many college students saddled in debt. For some, this debt can be a burden for years, if not decades, making it hard to start a family, buy a home, or simply enjoy a hard-earned income after years of arduous study. For these individuals, these tips are for you. Here are seven ways to pay off your student loans quicker.
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| Photo: Jernej Furman |
Reduce Your Need for Student Loans
Obviously, this recommendation doesn't apply to individuals who have already graduated from college. But if you are on your way to college, consider options to reduce your upfront costs. This may mean applying for scholarships or financial hardship grants or lowering your costs by satisfying your general education requirements at a two-year community college before transferring to a university to study your major. Tom Hanks is a fan of community colleges; you should be too! And why not? They can be exponentially cheaper than a university.
Find an Employer that Will Help
The marketplace is incredibly competitive, yet starting salaries aren't as high as you might expect. In fact, even graduates in the STEM (Science, Technology, Engineering, Math) fields will find that their starting salary is likely well short of six figures. In other words, don't expect monumental paychecks starting out. Instead, look for employers who offer other incentives, such as in-office perks, ample vacation packages, or robust health care and benefits packages. Some employers now offer student loan assistance – thanks to platforms like Gradifi – which at your age, might be preferable to a 401(k) plan.
Refinance Your Loans
If you're a college graduate who has paid down your student loan for several years, yet your monthly payment goes unchanged, consider refinancing or consolidating your loans to lower your costs. Platforms like LendingClub connect private investors and lenders with borrowers such as yourself, allowing you to avoid the hassle of going through a traditional corporate bank. You enjoy low-interest rates, and the investors enjoy a solid return on their investment. If you're unable to convince a bank to take on your debt and refinance your loan, alternative options like these might be right for you.
Leverage Your Tax Refund!
If you receive a tax refund, use it to pay down your student loans. You might be tempted to spend it on superfluous things that you likely don't need. Perhaps a large screen TV or a vacation to Hawaii. Avoid this temptation and do what's practical instead! Depending on your monthly fees, a single payment of $5,000 could help you pay off your student loans a year early or more.
Pick up Extra Work or Freelance
As a recent college graduate, the last recommendation you might want to hear is "Get a second job," but you might be surprised at the financial freedom it can provide. Perhaps this is why working second jobs is so popular with Millennials. Many people your age find that they'd rather keep working and make extra income than sitting at home watching Netflix all evening. If you don't know where to start, consider companies like Amway, which make it easy to start your own business. Other avenues include Etsy, or websites like Freelancer and Fiverr.
Put Your Dream Living Situation on Hold
At least for now. Believe it or not, you have plenty of time to earn money. In this day and age of Instagram millionaires and world-travel-via-social-media, you may be tempted to "keep up with the Joneses," but doing so can have long-lasting repercussions. On the other hand, living frugally now can help set you up for financial independence and success in the future. Live within your means, invest your money (something too few Millennials do), reduce your expenses wherever possible, and focus on paying down your debts – including your student loans.
Know Which Loans to Pay Off First
Do you have multiple student loans? If so, do you know which debt you should pay off first? It's generally accepted that you should attack the loans with the highest interest rates first, and then proceed onto the next loan when that one is paid off. Of course, you'll likely have to make minimum payments on all of your loans; if you can afford to pay extra month-to-month, dedicate this extra money to the loan with the highest interest. A snowball calculator can help you determine the most efficient order to pay off your loans.
(*) Jennifer Thayer is a long time contributor for Education & Tech. Follow her on Twitter to see what other tips she comes up with.
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