7 Simple Ways to Reduce Your Student Loan Debt

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Student loans are no joke. They are both the biggest barrier and the biggest excuse to saving. Yes, being in debt doesn’t feel good and it might feel like you will never be able to pay them off.

But you will. Don’t worry. This is easier than you think.

Sure, while a ton of people have student loan debt, there are also tons of stories of people just like you who’ve used simple strategies to pay off their loans faster than they ever imagined.

The faster you can pay back your debt, the sooner you can invest more money and grow your net worth.

Here are 7 simple ways to reduce your student loan debt that actually work.

1. Assess the details of your student loan debt

Loans come in different types, sizes, interest rates, and providers. The story is a common one. Your first bill arrives just shortly after graduation. A week later, another one arrives. This time from a different provider. Eventually, you realize you owed different amounts, to multiple providers, for several loan types.

This reality can be really confusing at first, and extremely overwhelming. Many people make the mistaking of avoiding looking into the details of their student loan debt in hopes that if they ignore them, they will disappear. This logic doesn’t work. Ultimately, you need to get serious and start looking at the details of each provider.

Here are the questions you need to answer to assess your student loan debt:

  • How many loan providers do you have?
  • Do you know the total amount of subsidized/unsubsidized loans owed?
  • What are your interest rates?
  • What are your monthly payments?
  • If you only pay the minimum monthly payment, how long will it take to pay in full?
  • Once paid off, how much money will have gone to interest vs. principal?

I know this can be scary. However, understanding the details of your loans is the first step to paying them off faster.

2. Make Bi-Weekly Payments (as opposed to monthly)

If you get paid bi-weekly, you know that you receive 26 paychecks per year. 52 weeks/2 = 26. Whereas, if you were paid twice a month, you would be paid 24 times per year. 12 months * 2 = 24. This same logic can be applied to loan repayment. Most student loan bills come once a month. As such, they expect you to pay 12 payments per year.

However, if you were to pay half a month’s minimum payment every two weeks, you will end up paying 26 payments. This amounts to one full month (or two bi-weekly) payments more each year. Yes, you are technically paying more each year, but it may feel like less of a burden. Especially if you are paid once every two weeks.

This small change in payment approach can make a huge difference down the road. A full extra payment each year will decrease your time in debt and reduce the total interest paid.

3. Apply annual raises to pay off student debt

Do you receive annual salary raises/adjustments?  If so, consider putting the net increase per pay period towards your loan principal. Each year, make an effort to adjust your automatic payments after to reflect that increase in salary. More often than not, people with massive student loan debt tend to apply their raises to something material.

It is important to balance your quality of life; however, it is equally important to think about your wants vs. your needs. Chipping away at that principal early will save you money in the long run.

4. Deduct student loan interest from your taxes

If you are currently paying back student loans, you are also paying interest to your servicer. The amount of money that you spend on interest each year is likely eligible for a deduction on your federal taxes.

For 2018, you can deduct up to $2,500 of interest payments on your taxes. Even if you take the standard deduction, you can deduct student loan interest. By reducing your total taxable income, you may be eligible for a tax return refund. Applying this tax refund to your student loan payments is an easy way to help pay them back fast.

5. Track Your Expenses

The average American spends over 60% of their income on the big three expenses: Housing, Transportation, and Food. How do your expenses compare? If you aren’t tracking them, then you should using a free tool like Mint.

If you are spending more than 33% of your after-tax income on housing, then you may want to consider moving to a less expensive location. Many people with student loan debt choose to purposely reduce their spending in these three areas and apply the cost savings to their loan principal.

Each time you pay more than your monthly minimum payment, you attack that principal. This can save you thousands of dollars over the course of the loan.

6. Refinance Your Student Loans

You might be paying a lot more on your student loans than you should be. Don’t settle for your initial student loan interest rates. Refinance options may exist that can lower your rate. By exploring student loan refinance options, and lowering your interest rate, you can save thousands, if not tens of thousands of dollars in the long run.

You can often get a new rate quote in less than 5 minutes. This could potentially save you thousands of dollars.

3.21% - 8.77%
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2.88% to 7.27%
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3.39% - 7.75%
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3.50% - 7.02%
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3.75% - 6.67%
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7. Get Your Side Hustle Game Going

It’s pretty simple: the more money you can make the more money you have to pay off your student loans. More people are side hustling just so they can get out of student loan debt. If you haven’t, you should consider starting a side hustle.

Next look at your full-time job. How can you make more money? The best way to increase your salary at your day job is to work overtime, earn a promotion, or take a job similar to your current one, but with more responsibility/pay.

Whatever you decide to do to supplement your income, try and be disciplined and put it towards your student loans.

That’s it. Take what you’ve learned and put it into practice. Crush your student loans. You can do this.

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