If you’re like me, you might have a love/hate relationship with New Year’s resolutions. Setting big goals at the beginning of the year is easy—often just as easy as failing within a few weeks.
Even if you don’t want to get in shape or eat healthier in 2015, there are other New Year’s resolutions you can make to improve your life. These days, financial resolutions are some of the most popular.
Fidelity Investments reports that 54% of Americans—an all-time high—set financial resolutions last year. In 2013, 24% of those surveyed who said they had made financial resolutions last year said they wanted to pay off even more debt in the new year.
Whether or not you have New year’s resolutions this year, here are a few things that you can easily accomplish to help you to pay off student loan debt in 2015.
1. Do some math with your debt
I’ve definitely been guilty of coasting along without any thought or strategy for overcoming debt. Paying off student loans seems easy; the bill comes, and you pay it. But do you have any idea how long it’ll take to pay off your loans this way? I sure didn’t, and what I found surprised me.
So my question to you is: How long will it take you to pay off your student loans with your current repayment plan? Do you know? If you do, then I applaud you. If not, then now’s the time to find out.
The first step is checking how much you’ll ultimately pay based on your current repayment plan. This means principal plus interest. Hint: It’s going to be more than your current outstanding balance, since interest continually accrues.
The easy way to calculate your grand total is to add your amount owed, interest rate, and payment amount together. The sum is your grand total.
Next, add $100 to your monthly payment and recalculate to see the difference. Did your total amount owed and payoff date drop significantly? I thought so.
2. Understand your repayment options
It’s likely that the standard repayment plan with payments for 10 years isn’t your best option for paying off your loans. You likely have better options, depending on your circumstances.
One option is to refinance your student loans at a lower rate. Refinancing can be especially helpful if the rates you’re paying now are high. Compare your current rates to refinanced rates to see how much you could save.
If your payments are currently too high, then you could take advantage of repayment plans that let you pay less. Learn more about income-based repayment here. If you’re struggling to make payments now, repayment can help you to get payments under control. Just keep in mind that these plans usually increase the total amount that you’ll ultimately pay.
If you’re working in public service or are a teacher or nurse, among other professions, then you may be eligible for special benefits. Check out public service loan forgiveness and teacher student loan forgiveness programs.
3. Set up automatic payments
Automating payments can help in two ways: by ensuring that your payments are on time and by slightly reducing your interest rates.
With student loans, there’s no good reason to pay late or skip payment. These options will only hurt you later, when your loans end up defaulting or in collections, meaning that you’ll pay extra collection fees.
Automating payment also help you to avoid missing payments, which can hurt your credit score. Plus, you’ll save the time it takes to mail a check or submit an electronic payment each month.
In some cases, you can even cut your interest rate by 0.25% simply by signing up for automatic payments. Though the reduction likely won’t result in substantial savings, you might as well take advantage of automatic payments and save a few bucks.
Setting up automatic payments is usually easy and only takes a few steps. Usually it’s as simple as logging in to your online student loan account and completing a few steps. Or you can call your student loan servicer to find out how to set this up.
If you can’t make your current payments, then make a change. See the above section on payment plans or check out what forbearance and deferment options are available.
4. Find extra money to pay off your loans
While getting another job is always an option for generating extra money, I’d like to start with a few other options first.
One big upcoming source of cash: your tax refund.
Contrary to what you might think, a tax refund isn’t free money. It’s actually your hard-earned money that you overpaid to the government during the previous year. The government simply returns it to you once you file your taxes.
Last year, the average refund was $3,034. That’s a big chunk of change that could really put a dent in your student loans.
Still, most people spend all of their refund on whatever they want: not smart.
Instead of spending all of your refund carelessly, use at least a portion of it to pay off your student loans. One option: put the same percentage you’d usually take from a paycheck toward paying off your loans. So, if your paycheck is usually $3,000 and you use $300 of that to pay off loans, then take at least 10% of your tax refund to pay off even more.
Another option is to review any bills that you pay monthly—for example, auto insurance. The beginning of a new year is a good reminder to compare rates for this and other services.
If you can shave $30 from your monthly premium by switching providers, then you can put that difference toward your student loan payments.
What about subscriptions that you don’t use? I’m thinking Netflix, the gym, and others. Drop these services and use the extra money to pay off your loans.
Though these savings can be small, finding a few ways to save $30 here and there can get you that extra $100 for loan repayment.
5. Stay updated on possible relief
Changes and relief for student loans are possible in 2015 (more on that in an upcoming blog post). While the Pay As You Earn program will definitely be expanded, federal student loan refinancing could also take effect.
In the case of any major changes, be ready to react. We’ll be sure to announce any big changes right here on the Student Loan Hero blog. To stay updated, enter your email address in the form below.
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