For many college students, taking loans to fund their education is the norm, but they do not realize how difficult their life will be until all debt is paid off. To repay student loans faster, preparation and strategy are key.
Coping With The Student Loans Burden
Monthly student loan payments are a nightmare for millions of American graduates. For the majority of college students, filling out applications is only the beginning of their university experience.
Borrowing money to fund their education is the norm, but its consequences on the students will affect them for many years after graduating. In fact, keeping up with all repayments can be challenging, especially without a full-time, remunerative job, or pre-college savings.
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Whether it is federal loans or private loans, this money must be repaid. Learning how to pay off student debt faster will not only make you more financially independent, but you will also be able to set new goals like buying your first home or saving for retirement. To help students become debt-free, there are few practical tips they can follow to start paying back early on.
HACK # 1: Start Paying While In School
Contrary to subsidized loans, which do not accrue interest until graduation, unsubsidized ones will start racking up interest payments on your first day of the freshman class. To keep your interest payments to a minimum, start making direct payments towards unsubsidized loans while you are still in school. Otherwise, inflation may affect these amounts, and you will have to pay a higher sum later on.
As a matter of example, physicians begin accruing interest on their medical loans while they are still in the training phase. Although most residents’ salary is about one-fourth of an attending physician’s, they are advised to start making repayments during their residency. If they keep postponing payments until training is over, interest will continue to accrue, adding thousands of dollars to their existing balance.
HACK # 2: Use Side Hustles For Extra Money
Every dollar matters, especially when you are repaying your student debt. You probably already have a 9-5 job that takes at least 40 hours of your week. But if you can, add a side hustle to your schedule: driving Lyft or Uber for a few hours, or renting out a room on Airbnb for a few nights every month. You can also create your side gig based on your skills. Some of them like graphic design, building websites or writing can be very lucrative in the long run. As you earn extra income, you can reverse a portion into your student debt to expedite the repayment.
HACK # 3: Use The Grace Period for Interest-Only Payments
Upon completing college, many graduates start thinking about jobs, career paths, or further education programs. Their student loan is usually the last thing they think about. This could not be more wrong. If you are trying to ignore your debt, rest assured that your lenders are not ignoring it. Students who wish to address their loans ahead of time should focus on the post-graduation grace period – this is the time before all principal payments are due.
Upon graduation, use your six-month grace period to start paying back the interest portion of the loan. Doing so will prevent interest from capitalizing on the principal, so your monthly payments will be minimal. If your principal balance is high, more interest will accrue over time.
Borrowing money for a college education is a widespread habit among American students, and it is not devoid of challenges. As you earn your degree, you will likely accumulate multiple student loans, ranging from federal to private.
How you manage these loans will determine your financial future. Once they are all paid off, you can start working towards newer goals, such as investing, retirement, or real estate purchase.
By simply keeping your loans under control, you will be able to plan your payments and be debt-free more quickly. And it will also boost your financial discipline a big deal, leading to more prosperity in future.
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I am a CFP® (Certified Financial Planner).
I have a severe phobia of bridges and dirty balance sheets.
Hobbies: blogging, meditation, and loving Bull Market (my dog).