Most people are shocked that it took five years to pay off my student loans. That timeframe was unusually short, and it took a lot of creativity and sacrifice. Here are some ways to pay off student loans fast.
Tips for Students
Apply your refund check to your loan instead of spending it. I was told to do this my freshman year of college, yet I didn’t listen. I could have saved thousands of dollars in principal and thousands more in interest. Unfortunately, I wasn’t paying attention to the interest accruing while I was in school. After you pay for necessary expenses, such as housing and books, use the remainder to pay on your loan.
Apply for grants and scholarships and use that toward your loan. This trick works well for graduate students with fellowships that receive housing and a stipend to cover expenses. Any additional funding can be applied directly to your student loans. I listened to an interview with a nursing student that used grants and scholarships as her primary source of funds to pay off her six-figure student loan debt. Some of her best practices were:
- Reapply for the same funds whenever eligible;
- Apply for money continuously throughout the year, since the application cycles tend to run quarterly; and
- Reuse essays when possible to reduce the time it takes to apply.
Change Your Loan Payment
If you can, always pay more than the minimum payment. When you look at your statements for your student loans, you’ll notice that the majority of your payment applies to interest. By paying the minimum, you continue the cycle, and you won’t make any progress on decreasing the loan balance. Paying additional every month or earlier will chip away at the balance sooner.
Also, consider refinancing to lower your interest rate to help reduce the amount of interest you’re paying. You may decrease your payment and reduce the total paid overall. Rates fluctuate over time so you should check regularly.
Tips for Workers
Take advantage of your employer’s student loan repayment program. My job offered $10,000 pre-tax for agreeing to stay a minimum of three years. It was a natural choice to make because I had no intention of leaving. The loan payment was made in a lump-sum directly to my loan servicer after taxes. The payment counts as taxable income, so make sure you factor that into your repayment plan and tax preparation.
Work in a field that provides student loan forgiveness. For example, teachers, nurses, government employees, and some non-profit personnel are eligible based on time in service and location. There are no guarantees, of course. Over 40,000 borrowers applied for the public service loan forgiveness program, and only 1.0% were approved.
Additionally, you could consider finding a contracting position overseas. If you have the skills to find a job in a combat zone, e.g., Iraq or Afghanistan, you can make a decent amount of money in a short period. When you are working out of the country long enough, some of your income won’t be subject to taxes. There are risks, strict requirements, and extensive training involved, but it may be worth it. Imagine paying off your student loans in a matter of months.
Do you have any additional tips or advice? Share them in the comments.