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5 Ways to Pay Off Student Loans Faster

Paying off student loans (and any credit card debt accrued while in school) should be a big priority for any student who is looking to get their personal finances in order and to get rid of a big cause of stress. For students who have a basic understanding of the way that compound interest works—that is that an extra $100 dollars paid off this year means $150 less down the road—paying off loans as fast as possible is also important.  Here are our 5 suggestions to help students do so:

1)      Put things in order…

Pay off loans in order of interest rate. Because interest is your enemy when holding debt, make sure to pay off higher interest student loans (generally these are any privately-held loans) and credit card debt before tackling student loans with lower interest rates.  Focus energy into paying off the loans with the highest rates for the greatest return.

2)      Take full advantage…

Not too many students know that they may be eligible for tax deductions. If paying off student debt, you can deduct up to $2500 of interest paid each year on federal taxes. Borrowers should check their eligibility for this benefit by speaking with their tax preparer or checking the IRS website.

3)      Borrowing has its benefits…

Because lenders compete for private student loans, there are often different perks that lenders offer to borrowers. Student borrowers should always check the small print of their loans to figure out if there are incentives given to those who sign up for auto repayment, keep a good payment history, or have graduated from school.

4)      Don’t waste the grace…

If you have a “grace period,” before student loans are due, make sure to check the terms of the grace period and use the time to get organized. Most loans allow students to set amount of time between graduating or leaving school before month payments start being due called a grace period (generally 6-9 months). During this time, students should take an inventory of all loans if they haven’t already and should come up with a repayment plan.  If employed, students should also begin to save monthly so they get in the habit of saving.  Setting aside money will also allow such students to either pay down a portion of their principle once loan payment kicks in, or will give such a student an emergency fund to rely on.

5)      Become the commitment type…

To really try to pay off debt, students need to commit to paying more each month than is actually due, especially if the minimum payment is interest-only. The more principle is paid off the better.  A trick that is used for mortgages that could also be applied to student loan debt is the trick of making biweekly payments instead of monthly payments.  This is very easy to do—especially for individuals who are paid biweekly, not monthly and will make an automatic extra months payment each year, which can help a borrower to pay off loans years earlier in the long run.


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