How to Pay Off Student Debt Fast
No matter where you went to college, there's a good chance you're coming away with a degree that may or may not prove useful, an endless stream of fun memories, and a pesky pile of student loans that you're now tasked with repaying. A report by The Project on Student Debt revealed that about 69% of 2013 graduates took out loans, borrowing $28,400 on average. Of those graduating with debt, about 19% used private lenders to fund their educations.
Paying off student debt is no small feat. It takes the average bachelor's degree holder a whopping 21 years to whittle that student loan balance down to zero. If you have a staggeringly high amount of debt hanging over your head, worry not. With a few smart moves, you can rid yourself of that nagging debt more quickly than you may have anticipated.
1. Don't stick to the minimum paymentJust because you're only required to repay a certain amount toward your loan each month doesn't mean you can't put in more. If you pay more than your minimum payment, you'll shorten the length of your loan. Let's say you have a $30,000 student loan with a start date of September 2015, a 6% interest rate, and a 10-year repayment period. If you make your monthly payment as scheduled, you'll wind up paying $333 through September 2025. Increase your monthly payment by $100, and you'll pay off that loan by November 2022 instead.
2. Put "found money" toward a lump sum paymentWhen money unexpectedly falls in your lap, it's natural to be tempted to use it for something gratifying or fun, but if you resist the urge to indulge, you can make a serious dent in your student debt. Using the example above, let's say you receive a $5,000 performance bonus one year after your loan's start date. Put it all toward your loan, and you can knock two years off your repayment schedule.
3. Live on a college student's budgetRemember when dinner meant instant ramen noodles and a side of pickles you swiped from the dining hall condiment bar? Well, you don't need to go to that extreme, but once you graduate and enter the working world, try living like you did back in college. Assume that you can't afford the latest gadgets, a new car, or that bigger apartment. Live frugally and put that saved money toward your loan payments.
4. Live with familyThe best way to pay down those student loans is to dedicate the majority of your earnings to paying them off -- and what better way to free up disposable income than to live with family rent-free? The downside, of course, is that you'll be back under your parents' roof at a time when you've come to cherish your freedom. On the other hand, if you take rent, utilities, Internet, and food bills out of the equation, you can use the money you would've spent on life's basic necessities to pay down your debt rapidly.
5. Pay off private loans firstIf your education was funded by both federal and private lenders, then your best bet is to repay your private loans first. The only exception here is if you somehow managed to snag a fixed rate for the life of your private loan that's lower than that of the federal rate. Most of the time, however, private loans come with higher rates and less flexibility than federal loans, so the sooner you eliminate those, the more money you'll save in interest.
Student debt can wreak havoc on your brain as much as your finances. You may have moments when you find yourself wondering why you took on so much debt in the first place. You may even feel the urge to pack your bags, fake your own demise, and live off the grid indefinitely in order to break free from a life hampered by college loans. Just remember: Paying off student debt is kind of like running a marathon -- it takes stamina, persistence, and dedication, but if you train your mind properly and keep your wallet on a strict diet, it can be done.
The article How to Pay Off Student Debt Fast originally appeared on Fool.com.
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