Graduating college can seem daunting. Especially when you have tens of thousands – or even hundreds of thousands – of dollars in debt waiting for you to repay. You’re not alone. According to the US Department of Education, the average student debt in 2018 was $33,310 and 2.7 million borrowers in the US owe over $100,000 in student loan debt. So, what can you do about it? The idea of having these student loans over your head for 10-25 years probably doesn’t seem very appetizing. The good news? There are ways to get rid of your student loans faster:
Use the Snowball or Avalanche Debt Repayment Method
There are two main methods people use for paying off large amounts of debt: the debt snowball method and the debt avalanche method.
The snowball method works like this: compile all your loans (however painful it may be) and list them from the smallest balance to the largest balance. “Snowball” all of your extra money toward the smallest balance loan while making the minimum payments on the remaining loans. As you pay off each of the smaller loans, you’ll have lower minimum monthly payments, fewer loans, and less debt over time (although it may not seem like much right now). This option is often more appealing because you get that positive reinforcement from physically seeing the loans being knocked down one by one.
The avalanche method works like this: compile all of your loans and list them from the highest interest rate to the lowest interest rate. You will start paying down on the loans with the highest interest rates first, that way you will pay less interest in the long run. This method can often save the largest amount of money, but is sometimes less appealing because the gratification is usually delayed. Since you can’t physically see the interest you aren’t spending in the long run and the higher interest loans are usually the bigger ones that take longer to pay off, it takes you longer to see results of your hard work.
Take on a Side Hustle
Obviously, there is no magic way to pay down your student debt faster – you have no option but to put extra money toward it. One way to make putting extra money towards your student loans not seem quite as bad is to have extra money coming from somewhere besides your regular full-time job. This doesn’t mean that you have to flip burgers at a fast food restaurant. Choose something that lets you enjoy one of your passions – for example, if you are crafty, you could create and sell jewelry on Etsy. You could also choose a job that would not only help you pay down current student debt but would also assist you with paying for graduate school if that is something you’re interested in. Companies like Target sometimes partner with employees to help them pay for graduate school.
Refinance Your Student Loans
Another very common way to take some of the burden off of student loans is to refinance the higher interest rate loans. Keep in mind that if you choose to refinance your loans, this typically takes away the option to use the snowball or avalanche debt repayment method since this usually involves grouping all your loans into one lump sum. You can also choose only to refinance the largest or highest rate loans and leave the smaller or lowest interest rate loans to knock down one at a time.
Take Advantage of Tax Returns and Job Bonuses
Usually, especially for people with a lot of debt they are paying on, the first instinct when you get your tax return or a bonus from work is to “treat yourself” and buy something you wouldn’t normally have the money to buy. Instead (however reluctantly), use this money to make a large lump-sum payment on one of your loans. Who knows – this could even be the closing amount needed for one of your loans which knocks out one of those monthly payments.
Get Additional Planning Assistance at Patriot Federal Credit Union
There are also lots of smaller, but still impactful, ways to pay down your student loans, such as setting up automatic payments. Some student loan companies, like Sallie Mae, even offer a small interest rate cut for enrolling. You can also get additional planning advice from one of our financial advisors at Patriot Federal Credit Union. They will sit down with you and go over your finances and financial goals to figure out a strategy that is best for you. If you are interested in getting a second pair of eyes on tackling your student loan debt, call 888-633-7328 or schedule an appointment!