Here’s what you have heard from me in the past in regards to student loans:
Those perspectives are great, but what happens if you already have loans? Most of the time, you can regain control of your financial life by taking your student loan debts seriously. A majority of the people that I encounter, regardless of their other consumer debt totals, typically only pay minimum payments on their student loans. There are ways to pay off your debt sooner and more efficiently.
Step 1. Find out the type(s) of loans you have:
The basic difference between federal student loans and private loans is that the U.S. government funds federal loans, and private loans are funded by institutions, such as banks or credit unions. Federal loans (generally) have a standard repayment duration of 10 years, and private loans have varied repayment periods. Federal loans tend to have lower fixed rates, loan forgiveness and deferment, and income-based repayment plans. When possible, don’t defer your student loans. If they are in deferment now, get them out. You can’t pay off debt quickly if you aren’t paying off the debt at all.
Step 2. Determine how long it will take to pay back your loans at your current pace:
As of Q2 2023, student debt collectively totals 1.77 trillion dollars. The average balance per borrower (as of Q3 2023) is ~$37,645. Using an amortization calculator, you can see how long it will take to pay off your student loans at your current interest rate and payment amount.
Step 3. Form a new plan to pay them off faster: We have good news! There is a way to pay off your student loans more quickly. Paying more than the minimum is the easiest way to pay them back faster. It’s an easy step, and it works. If you increase your payment by $50, $100, or more, you’ll pay off your loans faster and pay less in interest.
Remember: The longer your loans remain unpaid, the more you’ll pay in interest despite lower monthly payments.
Step 4. Pay off your loans and move on with your life:
You’re done. You have rid your finances of those pesky student loan payments forever. Save more money, build some wealth, and enjoy more of life. Do a little dance, and move on with your glamorous adult life.
