If you went to college, chances are you’re facing repayment of a significant amount of student loans. America’s student loan debt is more than $1 trillion, even more than the sum of all American credit card debt. Student loans can follow you around well into adulthood, and although the interest rates are generally low and controlled, it can still pose a big burden on your monthly budget, especially if you’re new to the workforce. But there are ways you can be prepared to pay your loans back faster than the maximum term. Here are five tips for speeding up your loan repayment that could save you money and headaches down the road.
Go with the shortest repayment plan possible. There are four different repayment options available for those who have taken out federal student loans. The standard plan will have you paying a minimum of $50 monthly for up to ten years. The extended plan has the same monthly minimum, but lasts between twelve and thirty years. The graduated plan also lasts for twelve to thirty years, but with only a $25 per month minimum. And the income-contingent repayment plan will see you facing minimum payments of as little as $5 a month, but lasts up to twenty-five years. It may seem like the lower the monthly payment the better the plan, but this is not the case. It will help your short term cash flow situation, but will greatly increase the final bill through years of additional finance charges. So take a long, hard look at your budget, and pay the absolute most that you can afford each month towards your student loans. Even if it’s only a little bit above the regular payment, it will help pay the loan down faster, and limit the interest.
Work with your employer on loan repayment. Most people don’t know this strategy, but employers will often help their people pay off student loans debt. Many companies offer an employment incentive contract, wherein you would agree that the company would make your student loan payments as part of your work compensation. In return, you simply agree to stay with the company for a minimum amount of time, generally two or three years. It’s another way for the company to structure your benefits, and it gives you instant assistance with student loans. Bring it up with prospective employers when you’re looking for work, or at your next bonus or review session at your current job.
Get the government to pay your student loans. The government actually has a Federal Student Loan Repayment Program, and it’s a strong option for those that work in a federal agency. Reach out to the Office of Personnel management, at www.opm.gov for all the details. Basically, the federal agency that employs you can pay up to $10,000 each year to your student loans, up to a maximum cap of $60,000. Head to their website’s FAQ section or call them at 202-606-1800 to get all the details.
Look into options for deferment, forbearance, or cancellation. There are several options to explore if you find yourself in a period of economic hardship. If you’re having trouble paying your bills, but don’t want to face late payment penalties or accrue additional interest, you should look into options for deferment or forbearance. There are many different scenarios where you can delay payments without additional interest, or even have your loans cancelled if you’re facing serious, long-lasting hardships. Check with your loan provider to find out all the options available.
Take advantage of volunteer opportunities. There are tons of situations where your work or volunteer activity can lead to loan forgiveness or cancellation. If you’re a police officer, teacher, lawyer, doctor or other heathcare employee, you can usually qualify to have your loans written off. And most volunteer organizations also offer the same, including the Peace Corps, VISTA and AmeriCorps. Find out more about loan forgiveness through volunteering by heading to the AmeriCorps website, at www.americorps.org.