Paying back your student loans can be a daunting task, with a sizeable debt hanging over you as you begin life after graduation. However, it does not have to be difficult, and while there are repayment plans that give you decades to pay your loan back in smaller monthly payments, you save significant amounts of money by paying your loan off faster.
For example, if you have a loan in the amount of $25,000, with 4.5 percent interest and a 20-year repayment plan at $158 a month, you will end up paying $12,958 in interest alone, which is nearly half of your loan amount. By switching to a 10-year repayment plan at $250 a month, you save a decade of your life and over $6,000 in interest. In order to achieve peace of mind and save money, here are five things you can do to pay back your student loans more quickly:
1. Make Biweekly Payments
Investopedia explains that this is an old trick often used to shave several years off of mortgage payments. This will help you in two ways. Since there is less time for interest to accumulate between payments, you will save in that area. Secondly, if you pay every other week instead of every month, you will make 26 payments a year, which adds up to an entire extra month of payment. The beauty of this is that you are still paying the same amount that you would make with a monthly payment.
2. Pay A Little Extra Each Month
Wise Bread reminds us that any extra amount that is paid, on top of what is required, goes directly towards the principal. Make sure that you do not opt to have that extra amount applied towards next month?s payment, as tempting as that sounds. Extra amounts applied to your payments will lower your principal balance more quickly. In general, try to curb your spending so that you can apply even more towards your principal.
3. Use Your Tax Deductions Wisely
Investopedia states that this is a great opportunity to decrease your principal further. First of all, you can use interest paid on student loans as deductions on your taxes, decreasing the amount of income that you have to pay taxes on. Depending on your tax rate, you should get some of that interest money back, which you can apply directly towards your student loan principal. This practice can save you years.
4. Look Into Loan Forgiveness Programs
If you are working, see if your employer offers any loan forgiveness programs. Depending on the type of work that you do, you may be eligible for federal forgiveness programs. The military offers their own programs; nurses can apply for the Nursing Education Loan Repayment Program if working in facilities that are experiencing nursing shortages; and government employees may be eligible for the Student Loan Repayment Program. Teachers may qualify for the Teacher Loan Forgiveness Program, and public service employees can take advantage of the Public Service Loan Forgiveness program, which forgives the balance of student loans after 10 years of work.
5. Request Loan Money As Gifts
It is more advantageous than a new toaster oven. When friends and family ask you want you want for your birthday and other holidays, tell them to invest in your education. You can set up a special account for that specific purpose or use a service like PayPal to receive funds to go towards your student loan.
Author bio : Written by Mandy Fricke ? EarnMBADegree
Source: http://www.ericfinance.com/pay-back-student-loans/
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