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After graduating, the next thing on the mind of many students is how to pay off student loans so they can focus on other expenses.
The standard term to repay federal loans is 10 years, however, the process can take a longer period depending on how much you earn. To speed up the payment process, here are five easy and effective strategies to pay off your student loans faster.
Figuring Out the Current Date When You will Pay Off Student Loans
To get started paying off your student loans, you first need to know just how much you owe. You can start by drawing out a list of all your debts and creditors, both Federal and private, your monthly payment dates, outstanding balances, and interest rates.
You can use SoFi’s student loan calculator to calculate your monthly payments to get an estimate as to exactly when you will have paid off your loans.
When you have an estimated date and monthly payments you can increase your monthly payments when possible to eliminate the debt quickly.
Reevaluate Your Student Loan Repayment Plan
Switching to a shorter repayment period can help you pay off your loans faster, although this will lead to an increase in your monthly payment. If you want to reconsider your payment plan, ensure that you can afford to pay the new amount consistently before switching.
If yours is a federal loan, then you have access to several repayment plans. To find out the plan you are presently enrolled in, sign into your Federal Student Aid (FSA) account.
For private loans, your payment plan is usually fixed until you finalize payments. If your lender refuses to adjust your payment period, you can choose to refinance with a new lender.
Federal student loans have repayment terms ranging from 10 to 25 years while private student loans take about five to 20 years.
Refinance Your Student Loans
Refinancing your loan involves you getting a new loan with your lender or a new lender but at a lower interest rate or an adjusted payment term to suit your needs.
To qualify for a refinance, most lenders require that you have a good credit score or a co-signer with a good credit history, and a stable income or employment history.
The disadvantage of refinancing federal loans is that you will no longer be eligible for some perks like student loan forgiveness if you took a federal student loan or income-driven payments.
Before you go ahead to refinance, shop around to compare the rates of different lenders then decide on what works best for you. Keep an eye out for payment policies and penalties for late payments.
Pay Your Loans Automatically To Get a Reduced Interest Rate
Many loan servicers offer a discount of 0.25% when you sign up for an automatic payment. This discount might seem small but can build up eventually to add to your savings.
The way it works, borrowers agree with their banks to automatically deduct the monthly payments for their loan on payment dates. Activating an automatic payment ensures that you don’t get into trouble for errors like forgetting to make a payment or not completing one.
If you’re unsure about how much you can set aside to pay back monthly, go through your budget to decide how much you can afford then set up the automatic payment.
By setting up automatic payments, you also have access to lower interest rates. Speak with your lender to learn about any interest rate discount you may be eligible for.