Student loan debt is one of the most significant aspects of contemporary American financial life. According to The Economist, total U.S. student loan debt surpassed $1.2 trillion in 2014, and over 7 million borrowers are in default. There are approximately 44 million people with student loans who have an average outstanding loan balance of $37,172.
Student loan debt might seem intimidating, but the truth is it's like any other loan. All you have to do is keep making regular payments until you've paid off the balance. However, there are some strategies you can use that will make paying off your student loans much easier.
If you can afford it, the simplest way to start chipping away at your student debt is to make more than your required monthly payments. It doesn't have to be a crazy amount extra. Start out paying an extra $20.00 each month, and slowly increase that amount over time. That way, you create a habit out of paying extra, and ultimately get to a place where you are making a serious dent in your debt.
Consolidate and Refinance Your Student Loans
In recent years, taking out debt consolidation loans and refinancing student loans through private lenders and debt consolidation agencies has become more and more popular. Many of these private companies offer attractive interest rates, particularly for people with graduate student loans, which can significantly decrease monthly payments. However, keep in mind by transferring your federal debt to a private lender, you are reducing your options of forbearance and income-based debt repayment, among other benefits.
Apply Your Raises Toward Your Student Loan Debt
If you get a raise at work, start applying 50% of that raise directly toward your student loan debt. You can do this by setting up a savings account that is specifically for debt repayment, or by paying extra on your monthly payments. Either way, this strategy enables people to benefit from increases in income while also paying off debt faster.
Set Up Automatic Payments For Your Student Loans
Automatic payments take all the guess work out of student loan repayment. They also eliminate the possibility of missed payments, fees, and unnecessary interest charges. By automating your student loan payment around the time of your paycheck, you also help ensure that your spending stays in line with your budget. Additionally, many loan providers offer a discount on your interest rate if you sign up for automatic payments.
Pay Toward Your Student Loan Debt Every Two Weeks
Rather than paying monthly, try splitting your payment in half and paying that amount every two weeks. This not only eases the pain of each payment, but by following this strategy, you end up paying the equivalent of an extra monthly payment each year. Over time, this can shave years off of your debt repayment.
Get Debt Free With First Alliance Credit Union
Paying off student debt might seem intimidating at first, but by paying more than the minimum, putting extra money toward your student debt and setting up automatic payments, you'll eventually see your student loan balance shrink.
You can also get help paying off your debts when you become a member of First Alliance Credit Union. Our robust online banking system with electronic bill pay service will remind you when your student loan payment is coming due each month, and you can even automate the payments to make sure you always pay on time. You can even get help creating a budget that prioritizes paying your student loans in our resource center, as well as download a debt payment kit that will help you get completely debt free.