How to Pay Back Your Student Loans Quickly and Effectively

If you are currently attending or have already attended college, then you may have considerable student loan debt. It can be emotionally and financially difficult to begin your post-college life deep in debt, and it will only get worse if you do not establish a clear plan for how you intend to pay back your student loans. Even if you are making minimum student loan payments on time each month, you will still have to wait years to be free of debt. However, you do not have to struggle with student loan debt indefinitely. There are techniques you can use to pay off your debt in an efficient way, reducing the total interest you have to pay and the time it takes to pay off your loans completely. Below are several tips to help you make the most of your student loan payments and eliminate your student loan debt as quickly as possible.

Know Your Student Loan Pre-Payment Policies

Some federal student loans often have pre-payment options, meaning that you can make early payments on your student loans. In such cases, if you have a part-time job while you are in college, you may be able to pre-pay a portion of your loan debt and reduce the financial burden you will face after graduation. However, not every federal student loan allows early payments. Also, although many private student loans may allow early payments, you may incur fees when making such payments. Therefore, not all of the money you pay will actually go toward reducing your debt.

You must also understand that some of your student loans may be unsubsidized, meaning that they will accrue interest immediately after you take out the loan. Other loans may be subsidized, meaning that they will not accrue interest until after you graduate. If you have any unsubsidized loans, you should prioritize payments on these while you are in school. Even small monthly payments will cut back on the total you will eventually owe due to accumulation of interest.

Know How Your Student Loan Payments Are Credited

Depending on the amount of student loan debt you have, the number of loans and the loan types, you may find it beneficial to make double payments each month. However, many student loan payments are automatically used to pay the interest first and then the principal. Therefore, the dates and manners in which you make your payments will matter. In many cases, making a second payment a day or two after the first will cause the principal balance to lower significantly because new interest will not have time to accrue.

You must check with your loan service provider to make sure that a second payment made during the same month will not be applied to your next billing cycle. Each company has its own unique policy regarding how payments are processed. Some loan service providers will allow you to select whether you want a second payment to apply to the current month or the following month. If you specifically request your payment to be processed in a certain manner, be sure to check your next loan statement to make sure that your request was honored. If you notice any error or discrepancy in the expected amounts listed on your statement, call your loan service provider right away to correct the problem.

Schedule Automatic Student Loan Payments or Reminders

Making your student loan payments on time is essential if you want to avoid paying late fees and additional interest in the long run. The best way to guarantee that you will never miss a payment is to schedule online payments that are automatically deducted from your bank account. Alternatively, you can set a recurring reminder on your cell phone or another device so that you remember to make your monthly loan payments on time. If you are planning to mail your loan payments to the processing center, then you must also allow approximately a week for processing. You must also clearly list your account number on your check.

Increase Your Student Loan Payments by Decreasing Other Spending

The more student loan payments you can make early on, the less total debt you will have to pay back. You can increase the money you have available to spend on student loan repayment by decreasing other spending. Living at home or sharing expenses with several housemates can help you get out of debt faster. Personal habits like eating at home more often, couponing and avoiding impulse spending will also leave you with more money to devote to student loan repayment.

Refinance Your Student Loans Carefully

Another option you may have is to refinance your student loans. By consolidating your student debt, it is possible to repay your loan balance more efficiently and reduce the total you will eventually spend because less interest will accrue. However, your credit score and your ratio of debt to income may impact your eligibility for loan consolidation. You must also be careful because deferment clauses that protect you in case of financial hardship may no longer apply if you refinance or consolidate your student debt. Additionally, you may have some student loans that cannot be consolidated at all.