Disclaimer: The advice provided may not work with your lender.
Student loans are overwhelming. The interest rates are frequently higher than a mortgage rate and the amount owed is sometimes equal to or more than a mortgage. Rather than give up, here are some things you can do to help the balance decrease.
- Figure out how much interest is accumulating each month. If you select one of the lower amount payment plans they typically only pay off the interest and you don’t even hit the principal amount. Look at options that your lender has to calculating the interest earned per month so that you know exactly what you’re paying on.
- Try to put one larger amount down so that you can get a month or two ahead of their calculated due date. I’ve had two of the lenders that take on the federal student loans. Both of these have given me a longer period before the next payment when I pay a month or more in an extra payment. This will be useful to get you to the next step.
- Make payments more than once per month. It’s a trick that works well with a mortgage as well. Interest on student loans accumulates more than once per month. By dividing up your payment into one or more per month it can cut down on the interest that’s adding up. If your lender won’t allow you to split payments you will need to be at least one month ahead so that you avoid their late fees.
- Pay slightly more than your payment each month. Even if it’s only $20 it will help to pay off the loan.
- Remember that interest. When you first start paying loans you are only paying on the accumulated interest. This is one of the ways that makes it difficult to pay off loans. Most people don’t start paying off their principal until years after they’ve begun payments.
- If you’re still in school try to pay on the interest. You may not be required to make payments, but in most cases the interest keeps adding up. Knowing how much interest is adding up each month can help you determine what you would need to pay to keep it from growing too rapidly.
- Don’t spend that tax refund. The refund should either go towards tuition if you are currently in school or towards your student loan. Unless you have circumstances that can’t be avoided, this is a great way to get ahead in their calculated payment schedule.
- Get a side gig if necessary. There are tons of ways to earn extra money, especially in the growing field of e-commerce. Even if you’re only earning an extra $50 here and there it can help pay down your loan.
- Examine other debt that you may have. If you are focused on student loans and ignore other debt these tips won’t help. Make sure you note interest rates and how much of the principal you are paying on other debts before fully focusing on student loans.
- Keep debt to a minimum. Avoid purchasing items that will add to more debt unless absolutely necessary. Make sure you pay off your credit card and carefully examine loans or deals that seem too good to be true.
These are just some things that I’ve followed. Feel free to chime in with other useful tips and tricks to reduce debt, especially student loans.