How to Accelerate the Pay Off of Student Loans
It's a sad fact of life that most young adults begin their post-college lives saddled with thousands of dollars of student loan debt. Many people are in no hurry to repay student loans, happy with making the minimum payment each month. Unfortunately, they are costing themselves thousands of dollars in interest over the course of the loan. The best strategy is to devise a plan that allows you to repay the loan as quickly as possible.
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Instructions
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Determine your current repayment plan. Lenders offer a fixed-rate plan, a graduated plan that begins with low payments that gradually increase, and an income-sensitive plan that tailors payments according to your income. To pay off the debt quickly, choose the standard plan.
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Make your payments on time. Many lenders gradually reduce your interest rate if you consistently pay on time.
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Pay more than the minimum each month. For large loans that you plan on paying for an extended period of time, the equivalent of one extra payment a year can save you thousands of dollars. Even if it's only $10 extra each payment, it will make a difference.
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Resist the urge to get a financial hardship deferment. Only the payments are deferred and the interest continues to accrue. Before asking for a deferment, examine all of your options.
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Put all windfall money toward paying off your loan. If you receive $100 for your birthday, put it toward the loan instead of spending it on the latest cell phone. It will hurt in the short-term, but will pay off in a few years.
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Keep a spreadsheet showing your loan and how it is shrinking. As you watch the outstanding amount get smaller, you will become more motivated to see it drop even quicker. Pay special attention to the amount of interest you pay each month. Diminishing interest payments are the reward for paying more than the minimum.
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