Your student loan helped you complete your education, but those payments can be a challenge to pay, especially when budgeting for the other things, like saving for a home, a new car, or just for that next vacation.
Did you know that there is over $1 trillion of outstanding student loan debt in the United States? That is more than the total outstanding credit card debt, which is kind of scary when you think about it. Additionally, it is beginning to have a drag on our economy.
So what’s a hard working person supposed to do? We have identified three different strategies to get ahead of your student loan payments and get them paid off quicker, while still being able to save for the important things in your life.
Make Bi-Weekly Payment
This is a simple strategy that is often used for mortgages, but translates to student loans as well. Instead of making loan payments one time per month, make them every 2 weeks. This does two things. First, it cuts down on the amount of interest you are paying because there is less time between payments for interest to accumulate. Second, it actually adds an additional payment to your loan every year. Since you are paying every two weeks, you make 26 half payments (or 13 full payments), instead of the typical 12 full payments. Additionally, this is convenient because most people get paid every other week, so you pay the same amount of your paycheck each time you are paid.
Pay More than Your Minimum Monthly Payment
This strategy is common with credit card debt. If you pay just the minimum payment (or the monthly loan payment in this case), you will end up paying a lot more in interest over the lifetime of the loan. Instead, consider contributing extra money whenever you make your loan payment. Even if it’s just $50 or $100, every little bit helps. If done consistently, you will shave years off your loan and will pay less interest as well.
A really easy way to do this is by setting up an automatic payment for your loan and set it at a higher amount. Not having to think about it every month will help you stay more consistent with your loan payments.
Consider Consolidation
If you graduated before July 1, 2006, it can pay to roll all of your federal loans into one. This might help you to lock in a lower interest rate than what you had before on each individual loan, saving you money over the life of the loan. Even if you graduated since July 1, 2006, consolidation can be a good way to help you keep your finances simple. If you have trouble paying them all on time, consolidating them to one loan will make it easier to stay on top of your loan payments.
Although student loans can feel overwhelming, implementing one or more of these strategies can help you save money.
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