The chances are excellent that you’re carrying significant student debt that you’d like to pay off quickly. And for good reasons. Student loan debt is excessively burdensome. An MIT AgeLab study found that 84% of American adults cannot save sufficiently for retirement because of their student loans. Your student debt payments can make it difficult, if not impossible, to pay your monthly bills.
According to Educationdata.org, the average student borrower takes 20 years to pay off their student loans. The longer you carry student debt, the more damage it can cause to your credit score. The best way to secure financial freedom is to pay off student debt quickly. Here are five ways you can do that.
1. Get Organized to Pay Off Student Debt Quickly
Begin by organizing all your student debt by total amount, projected pay-off date, issuer, and interest rate. Once you have all the information, you’ll be ready to determine what strategy to use to pay off your student debt as quickly as possible.
2. Automate Your Student Debt Payments
Most lenders prefer that you set up automatic payments and student loan providers are no exception. Check with your issuer, but most private and federal student loan lenders offer a reduction in your interest rate if you enroll in their automatic payment program.
3. Take Advantage of Your Employer’s Student Loan Repayment Program
The Coronavirus Aid, Relief, and Economic Recovery [CARES] Act authorized employers to pay up to $5,250 per employee toward their student loans. Find out if your employer is on board with this program. The payments are tax-free for your employer, not counted as taxable income to you, and can help you pay off your student debt more quickly. The authorization expires at the end of 2025, so you’ll want to get enrolled as soon as possible.
4. Debt Avalanche and Debt Snowball Methods
The debt avalanche and debt snowball methods are strategies for eliminating personal loan debt that you can use to pay off student debt quickly. Which method you choose depends on your personality and financial goals.
Debt Avalanche Method
With this strategy, you pay off your highest-interest debt first. Therefore, if you’re carrying high-interest, private student debt, you would prioritize those loans first and pay the minimum due on other loans. Thus, by focusing on higher-interest debt, you decrease the total debt you repay. However, most likely, the student loans with the highest interest rates may also have the largest balances. As a result, you won’t see progress as quickly as you would with the snowball method.
Debt Snowball Method
If you use the debt snowball method, you focus on your smallest balance first, paying off that debt and then moving on to the next one until you’ve paid off all your loans. This method gives you more of a boost as you eliminate debt, which can be an incentive to keep you going. Once you pay off one student loan, you add that money to your monthly payment on the following loan. As a result, you’ll be making larger payments and can pay off that student debt quickly.
Private student debt carries a higher interest rate than your federal loans. The interest alone can keep you in debt for decades. Therefore, it could be advantageous to refinance your private student debt for a fixed-rate or variable-rate loan with lower interest and more flexible loan terms. Currently, the interest rate on refinanced students loans has been falling, making this an excellent time to use this option to pay off student debt quickly.
You’re not alone when it comes to struggling with student loan debt. It can drag you down emotionally and stop you from advancing your long-term financial goals. Try one of these five ways to pay off student debt quickly so you can move forward toward financial freedom.