Loans: 15 Ways to Pay Back Student Loans Faster 2. – Paying back your student loans can be intimidating. I know — when I was graduating from college and trying to find work and a place to live in an entirely new city, the thought of also having loans to pay back made me terrified.
But I’m here to tell you — don’t freak out. You can pay back your student loans.
8. Pay More Than Required Each Month
It’s kind of obvious, but this is the best way to pay down a loan fast — and there a lot of ways to do it.
First, let’s get specific on how you want to pay more each month. When you make a loan payment, you pay off any interest that has accrued since your last payment, and the rest goes to lower your principal balance. If you pay more than required, you’re usually given the option of having that extra money lower your next payment or continuing on the same payment schedule as planned and having the extra money lower your loan principal. Even if you paid enough to count for next month’s payment, don’t take a pass! Be sure to tell your servicer that you plan to pay your loan as usual next month – that’s how you pay off the loan faster.
There are two very basic ways to be able to pay more each month on your student loans: earn more or spend less.
I know — it can be really disheartening when you’re having trouble finding any job to hear someone say “Go ahead, just earn more!” But there are several avenues you can pursue:
- Look for side work and one-time gigs on Craigslist.
- If you have a full-time job (or job that already covers all of your expenses), pick up a part-time job, and put all of that money towards paying down your loans.
- See if there are market research panels in your area. I once earned $100 for a panel that discussed credit cards for only two hours.
- Have a yard sale and/or bake sale.
This is, of course, the other side of the “have more money” equation:
- Live with someone else — whether it’s a roommate or your parents, sharing housing with someone can drastically lower your cost of living.
- If you live in an urban area and have a car, figure out if you can get by without it. Many cities also have car-sharing companies like Zipcar, which allow you to rent a car for cheap on a short-term basis.
- Spend less on entertainment. There are lots of fun ways to do this — hosting a movie night or potluck with your friends instead of going out, going to bars during happy hour instead of late at night, and borrowing books and movies from the library instead of buying them are just a few options. For more ideas, check out our articles on 47 Cheap, Fun Things to Do This Weekend, How to Watch Movies in the Theater for Free, and 50+ Ways to Have Free Outdoor Fun.
- Take a hard look at your budget. Are there discretionary expenses you can lower or eliminate? It might not be fun, but it can be worth it. Or if you really want to go all in, you can consider doing a spending fast.
9. Switch to Biweekly Instead of Monthly Payments
Investopedia does a great job at breaking down why paying biweekly instead of monthly is a good idea:
First, you are paying less in interest because there is less time between payments for interest to accumulate. Second, you will end up making an extra month’s worth of payments every year. This is because paying every other week equals 26 annual payments. It’s a relatively painless way to reduce the cost of borrowing and pay off your loans faster. If you get paid biweekly, the payment feels the same on your wallet because you are taking half of a payment from each paycheck…. You may not be able to afford an extra payment a year, but you can afford to send in an extra $5 a month or $25 every other month.
10. Take Advantage of Tax Deductions
If you earn under $60,000 a year (or $120,000 if you’re married and filing jointly), you can deduct up to $2,500 of student loan interest you’ve paid in the last year from your taxes. According to TurboTax, “If you paid more than $600 in interest to a single lender during the last year you should receive a 1098-E form showing how much interest you paid for the year.” You can still take the deduction without this form, but you may need to present other records. However, do not extend the term of your loans unnecessarily in order to continue receiving the benefit; it’s just not worth it.
One other tax note — if you get a refund, consider putting all of it towards your loans.
11. Get Rewarded
There are several websites and programs that allow you to earn rewards for spending money or paying down debt, and these rewards can be put towards your loans. Some of these programs are education specific, allowing you to put any credits you earn directly towards paying down debt. Others reward you for paying down your debt by giving you credits that you can use to try to win prizes such as grocery gift cards, cash, or student loan payments. If you are able to pay your bill off every month, you could also consider getting a cash-back credit card and putting any cash back you receive directly to your loans. Search around online to find a good rewards program for you.
One note about all of these programs — it is not worth it to buy things you wouldn’t already buy in order to get the rewards, and it’s definitely not worth going into credit card debt. Only make purchases you’d already make and can pay for.
12. Enlist Your Cosigner
Your cosigner (likely Mom or Dad) is on the hook for your loan too, which means they have incentives to help you pay the loan back faster. In fact, if you have trouble paying back your loan, it could affect your parents’ credit rating and their ability to do things like finance a house or a car. They were there to help you attend school in the first place, and they probably have a continued desire to help you succeed.
Talk to your cosigner about your loan status, especially if you’re having trouble paying the loans back. Your cosigner might be willing to match your funds or supplement your payments. Or perhaps they would prefer to pay back your loans now and have you owe the money directly to them. No matter what, be sure to keep lines of communication open with your cosigner, so you can figure out a plan together.
13. Ask for Loan Repayment Money for Gifts
Tell your friends and family that instead of wanting traditional birthday, holiday, and graduation gifts, you’d rather receive funds that go to paying down your student loans. Consider writing a letter to everyone to this effect, explaining the value of your education and how important this is to you.
14. Last Resort: Deferment or Forbearance
If you absolutely cannot pay your loans, there are a couple of options available to you: deferment and forbearance. Avoid them both if you can; neither is an ideal option.
In deferment, you can take a break from paying the principal on your federal loans if you’re unable to find work or if you meet the criteria for economic hardship, for example. If your loan was “subsidized” – that is, based on financial need — interest won’t build up during deferment. For unsubsidized loans, you continue to be responsible for interest. Deferment can also be available to those in military service and to people in a few other situations.
If you don’t meet the criteria for deferment on federal loans or if you have private education loans, forbearance allows you to stop or reduce payments for a specific period of time — but interest continues to accrue. Forbearance is intended for borrowers who have a temporary need to postpone payments and expect to be able to return to payments within a few months.
Both options are better than defaulting, but neither are good — by continuing to put off paying, you’re only making your total loan balance larger.
15. Work With a Reward in Mind
Achieving goals is a lot easier — and more fun! — if you work with a reward in mind. While being debt free is certainly a reward of its own, planning to travel or even just treat yourself to a nice meal can be a great way to help you pay down your loans faster.