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How to crush your student loans

Mortarboard hat flying - finally free from student loans!

You did all the right things. You went to college and got a job. With graduation behind you, chipping away at your student loans is a priority. Wait, who wants to chip away? Wouldn’t you rather crush your student loans before you’re a senior citizen?

More and more people, with regular everyday jobs, are sharing stories of how they paid off huge student loan debts in less than 4 years. There were no inheritances, and no one won the lottery to make it happen. If they could do it, you can do it.

Here are strategies you can use to pay off your student loans fast.

Get real with your numbers

Whether you’re looking at $15,000 or $115,000, pay attention to your rates and balances. How many loans do you have? How many are Federal versus private? Does your lender offer a rate deduction if you pay through auto-debit?

If you have multiple loans, use the avalanche strategy.

Commit to a specific goal, like “I’m paying off my student loans in 4 years.” You can always adjust the timeline as circumstances change. Not having a specific goal to aim for is like leaving to go on a trip without knowing where you’re going.

Pay more than the minimum

There are no success stories of “How I paid off X in student loans” where the hero did it by making minimum payments. Try and make more than the minimum payment even if $10 over is all you can do for now.

If you can’t make more than the minimum payment, make an extra payment using the weekly or bi-weekly method. Do this by dividing your monthly payment into weekly or bi-weekly amounts. You’ll end up with an extra month’s payment at the end of the year.

For example, if your monthly payment is $300, you’ll end up paying $3,600 over the course of a year. If you make 52 weekly payments of $75 instead, you’ll end up paying $3,900 over year. You get the same result if you pay $150 every 2 weeks.

Do you receive 26 paychecks versus 24? There are two months every year where you get a third paycheck. Depending on your payroll schedule in 2019, those months are March and August or May and November. Apply those extra checks towards your student loan.

Don’t forget “found money” sources like a raise, bonus, tax refund, inheritance, and cash back from credit cards. Try putting 50% of found money towards your loans, 30% towards savings, and 20% to celebrate.

Ask family and friends to contribute loan payments instead of physical gifts for birthdays and other occasions. This can be done through a campaign you set up on LoanGifting which is similar to a GoFundMe campaign.

Make sure to tell your loan service provider to apply any extra payment over the minimum to your principal every time. This is important! Otherwise, they’ll apply it to your next monthly payment looking like you paid early. This won’t help bring down the loan balance or interest.

Opportunity costs

There are two main money levers: increasing income, or decreasing expenses. You can focus on one or the other, but if you want to crush your loans faster, do a combo of both.

Decreasing expenses is straightforward. Having roommates or holding off on updating your cell phone may feel like a sacrifice. Remember it’s temporary. Remind yourself a new phone today can’t compete with the feeling of getting rid of student loans forever.

Increase income by side-hustling. 4 out of 10 Americans have a side gig. You can make some decent cash and expand your network and skills all at the same time. Catering, baby or pet sitting don’t require heavy thinking. Finding mock jury work online or in person can be interesting. TaskRabbit, Gigwalk, and Field Agent are a few apps that will help you find side gigs. Freelancer, Upwork, and Fiverr can help you find freelancing work.

Tax breaks

If you’re single, adjust your withholding from 0 to 1. This will boost your paychecks to give you more money now to pay down your loans instead of waiting for a tax refund.

You may be eligible to get a tax deduction for the interest you paid on your loans. Investopedia has a good summary or check with an accountant. You can also try the IRS site and answer their questionnaire to find out if you qualify.

Refinance your loans

Consider refinancing if you have good credit, a steady job, and a history of on-time payments. You can lower your rate and consolidate federal and private student loans into one payment. Make sure to take the money saved from the lower rate to overpay the principle each month.

Grants

This is free money if you qualify. Grants are available for the fields of health, law, education, and military. The Public Service Loan Forgiveness program is another form of grant, but you need 10 years of qualifying payments.

Some require service time in exchange for the funds, so you need to be flexible. Start with Nitro and Student Loan Planner if you want to find out more.

Employer assistance

Employers offering student loan repayment assistance is a hot topic in the news. Most of the companies that offer benefits are larger companies like Aetna, IBM, and Abbott.

Keep in mind this is a new benefit, so program structures differ from company to company. It’s also not a current tax benefit for companies or employees like 401(k) contributions. You’ll pay taxes on any repayment assistance as income.

Find accountability partners

Share your goals with your friends, family, and coworkers. They’ll cheer you on when you tell the world you’re determined to pay off your loans in half the time or less. And they’ll help you stay focused on your goal.

Find a community of others interested in achieving similar financial goals. You’ll get support and tips from others doing what you want to do.