Just last year, the total amount of student loan debt in the U.S. reached an all-time high record of $1.5 trillion. And thanks to compound interest and the constant stream of new debtors, the number keeps rising to the tune of $2,726 per second.
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The US debt Stats become a bubble with no end in sight due to the wholesale shutdown of universities and colleges and the lack of government intervention. As the price tag of education continues to reach greater heights, so do student loans.
Sadly, paying these loans has become a seemingly impossible, if not, costly endeavor because of stagnating wages for the majority of U.S. workers.
There’s No Magic Formula to Pay Off Student Loans Quickly
Let’s clear the air first before we dive in. There’s no magic formula to pay off your student loans quickly.
There’s no special trick or any abracadabra to help you settle your student loans in 30 days flat. No, it’s not going to happen. But, there are steps you can implement to get your foot in the door when it comes to getting rid of your student loan debt for good.
It’s totally doable to pay off your student loan debt, but it’s going to take time, and a whole lot of sacrifice, and commitment.
Use Your Job to Your Advantage
One way to efficiently settle your student loan debt is to take advantage of your employment. There are jobs that provide student loan forgiveness in return for working in a service capacity.
Lawyers, doctors, nurses, federal agency employees, volunteer organization workers, public servants, and automotive workers are eligible for student loan forgiveness or assistance. Thus, check if your career goals align with the eligibility criteria for forgiveness programs.
Some employers now include student loan assistance to their benefits package. With that, ask your present employer if they provide or would consider providing this perk, or put this factor into consideration while hunting for a new job. It might not be explicitly stated, but it could be worth negotiating into your compensation package.
Steer Clear of Certain Repayment Programs
Some repayment programs of the government like income-based repayment can be a lifeline for those who struggle to repay their student loans. Such repayment programs can save you from defaulting on federal loans. However, if you want to pay off your student loan debt faster and you have the funds to do so, these repayment programs might pose some disadvantages to you.
Most repayment programs will extend your loan term to reduce your monthly payments. This maneuver will not only prolong your burden on paying off debt, but it might also force you to pay more on interest, especially if you’re not qualified for loan forgiveness.
The lesson here is to avoid repayment programs that lengthen your payment terms if you want to pay off your student loans quickly.
Take Advantage of Tax Deductions and Credits
Two school-related tax deductions could be your saving grace and help lessen your tax burden.
The first deduction is for the student loan interest tax. It will help you minimize your taxable income by up to $2,500 for the interest you paid on student loans for the year you’re filing on.
To qualify for this deduction, you need to:
- have a MAGI (Modified Adjusted Gross Income) of less than $160,000 if you’re filing jointly or $80,000 as a single taxpayer
- be enrolled in a degree program at least half the time when you took the loan
- be filing as “married filing jointly” or a single taxpayer
- not have somebody else who claim you as their dependent on the tax return
- have paid interest on a loan under your name
The second type is for up to $4,000 annual tuition and fees deduction. This deduction can only be claimed for tax years in which you pay for educational expenses. Moreover, it can only be an option if you go back to school, or you’re still in school while paying off your student loans.
To qualify for this deduction, you need to have legit education expenses of higher education such as tuition and fees, board, transportation, and etc. You’re also qualified if you have an eligible student, say, your dependent or your spouse, for whom you claim a tax return exemption.
You can also be eligible for tax credits if you’re still schooling or went back to graduate school. It will directly shave off the amount of tax you owe.
Refinance Your Student Loans
Refinancing is now becoming a popular option for borrowers with relatively high-interest rates and good to excellent credit scores. Fortunately, it applies to student loans.
Basically, a loan refinance works by taking out a new loan and use it to pay the original loan. It will help you get lower interest rates because you’re more financially capable compared to when you took the first loan.
Take note that when you refinance your federal loans, you will lose access to federal programs like student loan forgiveness or income-driven repayment. But then again, if you think that refinancing is a good option for you, then go for it. You can use a student loan calculator to estimate the possible expenditures.
We also recently wrote an article about student loan forgiveness strategies.
Look for Interest Rate Deductions
Signing in to automatic payments is one way to pay off your student loan gradually. There are loan servicers who offer a 0.25% discount for interest rate when you enroll in automatic payments. It might be a small discount, but when added, it can help you save more over the life of your loan.
In general, autopay is a good idea because it reduces your probability to get into trouble for missing a payment. That being said, talk to your servicer and ask about possible interest rate discounts they offer that you can avail.
Get a Side Gig
If you want to settle your student loan debts right away, you need to make more money. But of course, you can’t always look for a better job or ask for a compensation raise on the spot. You can get side hustle instead to increase your income.
A side gig doesn’t always mean becoming a driver for Lyft or Uber. It could also mean doing something simple like delivering with Grubhub or Postmates, selling preloved items on eBay or Craigslist, start a freelance writing business or start a dog walking business. You can even list your room or your property on Airbnb to earn some rental income and put your earnings to student loan payments.
The key here is to be resourceful. If you can find other ways to generate extra income, the better!
Here are some of the ways that we have been able to make extra money to pay our student loan debt:
You Have to Pay More
The best and most straightforward way to kiss goodbye to your student loans for good is just to pay more, although it’s easier said than done.
It doesn’t necessarily mean you’ll pay double or triple. If you can afford to pay $30 or $50 more every month, that will do. Whatever is helpful and possible, do it. Paying a little over the minimum will help eradicate your student loan debt sooner. You just need to make sure that your loan servicer applies your additional payments to your principal loan. Hopefully, if your situation will allow in the future, you can increase the extra payment you make.
To check how additional monthly payments can affect the total cost of your loan and how much you can save on interest, you can use a student loan repayment calculator.
Here’s What You Can Do Further…
Besides paying more on your monthly bill, you can also make extra payments, which can be easy if you have a stash of cash hidden for the rainy season.
Got an incentive for a job well done? Use it to pay your loans. Got a birthday from your parents? Use it to pay your loans. Got a tax refund? Use it to pay your loans.
Using your extra money for your loans now will pay off when you’ve paid less in interest. Then you’ll have more money that you can spend however you want.
Another efficient way to make additional payments and get rid of your debt is to pay bi-monthly. Simply cut your bill in half and pay that amount every two weeks instead of making a single payment every month.
It might sound like it wouldn’t do much, but this strategy will add one additional payment to your loans every year. And that’s a significant difference, particularly if you have a large balance.
Don’t Forget to Make Budgeting a Mantra
The last card on your deck that you can use to pay off your debt is to minimize your monthly expenditures wherever possible.
Whether it’s a $100 of spare cash that you didn’t spend on eating out or a $60 less per month because you canceled your cable subscription, it pays to look for extra wiggle room in your budget and use it to settle your student loan debt.
The national total student loan debt is expected to snowball in the following years to come, which calls for us taking responsibility for ourselves. Let the numbers fall where they may, but it’s all up to us to look for ways to iron out our finances. And if those ways will require paying off your student loans the hard way, so be it.