It is common to hear people discussing a desire to pay off debt. You may hear your parents talk excitedly about how close they are to paying off their mortgage, or your friend may share with you that they only have three car payments left. People rejoice at the thought of paying off all their credit cards. These debt repayments bring people peace and joy because a financial burden has been taken off their shoulders. Despite the desire for financial freedom, you rarely hear individuals talk about actively repaying their student loans.
Student Loans Don’t Have to Be a Lifetime Commitment
Think about it, when was the last time you heard someone say, “I can’t wait to pay back my student loans,” or “I sent in an extra payment toward my student loan this month.” It seems that student loans are the only debt people aren’t in a rush to pay back. Instead, borrowers nickel-and-dime their student loans, paying the bare minimum each month. It’s not uncommon to hear many borrowers say that they expect to carry their student debt with them for the rest of their lives.
Over the years, student debt has become more and more normalized in America. However, owing tens of thousands or, in some cases, hundreds of thousands for anything other than a house is far from normal. According to the Federal Reserve, the average student loan borrower owes $32,731. This is a large number and can feel overwhelming to pay back, especially when you have other debts and monthly bills. However, repaying any debt is possible if you are disciplined and have a plan.
Option for Paying Off Student Loans
There is no one-size-fits-all approach to paying off student loans. If you do not qualify for student loan forgiveness, you may look into refinancing your loans to secure a better interest rate. Whether you refinance or not, there are a couple of strategies that will help you pay off your debt.
For those with high student debt and other small debts, such as credit cards and car notes, the Debt Snowball Method might be the best repayment strategy for you. Use any extra money you have in your budget to quickly pay off your smallest debt, and send in the minimum payment for everything else. Once your first debt is paid off, use that extra money to go toward your next highest debt, and keep paying the minimum for everything else. Repeat this cycle until your student loan is your last debt left. At this point, you should have a significant amount of money to allocate toward your student loan. Paying significantly more than your minimum student loan payment will not only help you pay the debt back sooner but also save you tons of money in interest.
Pro tip: Send in a couple of small student loan payments each month instead of one large one. For example, if you plan to pay $400 toward your student loan next month, send in a $200 payment one week and another two weeks later. This will lower the amount of interest that builds up between payments, and more of your money will go toward the principal, saving you money in the long run.
Putting tax refunds, work bonuses, and large monetary gifts toward your student debt will help you pay it off even quicker. The strong payment history you will build as you aggressively pay off your student loan will also improve your credit score. If you are fortunate enough to owe very little in student loans, don’t feel like you have to hold on to them forever because that’s what other people are doing. Take advantage of your situation and pay them off as quickly as possible.
Paying off your student loans ultimately will free up more income for you to achieve even bigger financial goals.
This article is purely informational and is not intended as professional financial advice.