Most student loans give you 10 years to pay them off, but who wants to make loan payments for an entire decade?
I paid off my student loans in two years, so I’m proof that anything is possible. Most people won’t get them paid off that fast, but getting out of debt five years after graduation is a reasonable goal. Even if five years doesn’t work for you, you can certainly learn how to pay off student loans faster by following some simple tips.
1. Get on a budget
Paying off student loans early doesn’t have to cripple your lifestyle, but you might have to give up some shopping sprees. Or even hold off on the next “treat yo’ self” day until your loans are paid off.
If you don’t already have one, it’s time to start a budget. Whether you have an irregular income or want to keep things simple, there is a budgeting method that will work for you. By avoiding spending on frivolous wants that you’ll enjoy today, you’re robbing your future self of opportunities. Student loans suck up more money than just the balance you’re paying off. Getting out of debt early can save you thousands of dollars in interest. And once you’re out of debt — then it’s time to treat yourself.
2. Automate your payments each payday
If you’re paid bimonthly or biweekly (or even weekly), you’re in a great position to get out of debt early. Split your monthly student payment in half and pay it automatically each payday. This saves you a little money in interest and gets you in a good habit of making regular payments.
People who are paid every other week get 26 paychecks each year. That is two more paydays than your regular monthly payments require. This gives you a full extra payment each year. Sure, it isn’t cutting your debt in half, but every little bit will help in paying off student loans early.
3. Increase your payments
Once you start paying your student loans twice a month rather than once a month, your income and expenses are on the same schedule. You don’t have to save up for a big payment once each month, it just happens automatically.
Because you’re already used to living without that money, it doesn’t cramp your budget or feel like you’re making huge payments. That is a big psychological win in your quest to debt freedom. But if you really want to know how to pay off student loans faster, you have to pay more than the minimum.
Every month or two, increase your recurring automatic payment for your student loans. Whether it is $10 extra per payday or $100 extra, every dollar counts. When I was paying off my student loans, I went so far as to pay a full student loan payment each payday. I was making two or three full payments each month and my student loan balances were falling fast.
4. Put bonus income toward your loans
Every once in awhile, you might get some bonus income. Because you’re used to living on your regular budget, that extra income from a bonus, tax refund, or gift can go right toward your student loans. You won’t miss the money because you were already living without it.
Whether it’s $5,000 here or $2,000 there — it all adds up. Just like the extra payments you make each payday, you’re taking steps to rapidly reduce your loan balance. Early payments save you money on interest every single month and help you pay down your loans faster.
5. Don’t lose focus
It can be tempting to buy the new iPhone or splurge on a shopping spree, but each big purchase you make delays your debt freedom date. Stay focused and be aggressive with extra payments. The sooner you’re out of debt, the sooner you can keep all of those dollars for yourself. If you work hard and pay off your student loans in five years, you will be in great shape for a successful financial future.
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