The simplest way to pay off your student loans faster is to begin making payments greater than the minimum requirements, but there are a few more tactics you can employ to get you to zero balance faster. Here's 3 strategies to get you started.
Make it a habit to pay more than the minimum
Like all types of debt, paying more than the required minimum payment will shave years off of your total pay off schedule. Even if it's $50 to $100 per month, the impact of additional payments towards debt work in reserve compound interest. Here's an example: let’s say you owe $10,000 with a 4.5% interest rate. By paying an extra $100 every month, you’d be debt-free more than five years ahead of schedule, if you were on a 10-year repayment plan. And if you're able to cut costs elsewhere, you can easily bump that number up to $200 per month and increase the speed to pay off even more. The faster you cut out debt, the more of your income you're able to keep. So don't get comfortable with the minimum payments because of the short term benefits of keeping more income, cutting out debt now will free up more money in the future when you also increase your earning power.
Enroll in Auto-Pay
If you don't want to refinance your student loans, enrolling in auto-pay could be a great tool to lower your interest rate, which in turn maximizes your contributions towards the principle each month. Federal student loan servicers offer a quarter-point interest rate discount if you let them automatically deduct payments from your bank account. Many private lenders offer an auto-pay deduction as well. This strategy will not outweigh aggressively paying over the required minimum payments, but it will give you an extra bump to speed up the process even more. By using this strategy you can have your minimum payments covered with auto-pay, and have your extra payments made each month whenever you desire. And don't forget you not be able to make an extra $500 payment each month, but even with fluctuations from $5 to $1,000 you're still making significant strides towards being #DebtFree. But remember that refinancing your student loans could be a great way to lock in a lower interest rate for your student loans, and consolidate your student loans into one payment per month.