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3 Smart Strategies for Paying Off Your Student Loans Faster
Almost $30,000! That's what the average college graduate has in debt upon obtaining a degree, according to the most recent Project on Student Debt report.
And that debt can follow you for years. A recent article on the increase in seniors with student loan debt reported on one woman who might be be 81 before she pays off her student loans!
Fortunately, if you're one of these indebted graduates, there are ways to pay back student loans before you’re eligible for AARP. You might be able to have some of your debts forgiven. You might be able to pay off your debt faster than you thought. You could even enter contests to help you pay down those students loans.
Yes, it would be great to win $10,000 in a contest telling your story about debt, and we'll get to that. But since not everyone can win, we'll look at your other options first.
How Much Will You Actually Pay?
It may be painful to do see the truth, but use a student loan calculator to determine how long you'll be in debt and how much you'll pay if you stick with your current payment plan. Enter the amount, your interest rate and how much you pay each month. Seeing how long it will take to get out of debt with your current monthly payment, and much you'll pay in interest alone, might motivate you to make a new plan.
For example, if you owe $40,000 at 7% and pay $300 per month, you'll be paying not just the $40,000, but also $37,578 in interest. You borrowed $40,000, but you’ll repay a total of $77,578. And it will take you almost 22 years to pay off that debt!
1. Figure Out if You’re Eligible for Forgiveness
What if you don't want to be in debt for decades? What can you do?
Start by determining if you can eliminate some of the debt without paying it. The U.S. Department of Education provides a lot of information on eligibility to have your federal loans “forgiven, canceled, or discharged.” You might qualify if…
- You're permanently disabled
- You file for bankruptcy
- Your college falsely certified your eligibility for the loan
- You become a teacher in a low-income school
- You volunteer for the Peace Corps
- You become a child or family services worker
- You're in the armed forces and serving in a hostile area
Pay attention to the details. For example, loan forgiveness isn't automatic with bankruptcy — you have to convince the judge that the debt is too much of a burden.
If you don't qualify for any of the methods above, or get only partial loan forgiveness, use the following tips to pay off your loans faster.
2. Enter Contests That Pay Off Student Loans
If you've had a tough time with student loan debt, you might be able to cash in on your story by entering a debt-related contest. They come and go, so you'll have to search online from time to time, but the prizes can be significant.
For example, the recent Student Debt Smackdown Contest paid the winner $7,500. Anyone who was a college student with student debt qualified to enter. In another contest, the publishers of Consumer Reports paid $1,000 for the best cartoon drawing illustrating the “Dangers of Debt.”
If you're reading this before November 30, you still have time to enter the My Life After Debt contest. It has already awarded $1,000 to monthly winners and will pay $10,000 as a grand prize. This contest is free and simple to enter. Here are its instructions:
1. Think about what “Life after Debt” means to you.
2. Make a video or write a story about “Life after Debt.”
3. Upload your entry and fill in the form below.
Browse the recent submissions and you'll notice that there aren't many 500-word essays here. Some entries are a single paragraph or even just a sentence. Drawings are random, so it may not be worth your while to do much more than that. On the other hand, perhaps the company will want to use your story, and will pay for more details if you make it interesting.
3. Make and Save Extra Cash to Pay Down Your Debt
Yes, this is the good, old-fashioned strategy of putting extra cash toward your loan payments. However, the faster you pay off that debt, the less interest you'll pay. And you can pay it down quickly.
Here are some strategies that have worked for “extreme debt reducers,” according to a US News and World Report article titled “How to Pay Off $30,000 of Student Debt in 3 Years”:
- Move in with your parents to save on rent and apply the difference to debt
- Find roommates and apply the savings to debt
- Switch to cheaper prepaid or nontraditional phone plans and use your savings to pay down loans
- Sell anything you can and use the proceeds to pay down loans
- Get a second job or start a freelance business and put 100% of that income toward debt
Websites like Gradible can also help you pay off debt. Once you sign up, you complete certain tasks to earn credits, which are applied to whichever student loan you designate. University of Phoenix graduate Crystal Knapp earned $800 toward debt reduction using a similar site called SmarterBucks, according to the Boston Globe.
Getting Student Loan Advice
If you seek help, watch out for the many student debt assistance scams. Even the perfectly legal companies in this field typically charge big fees to do things you could do on your own.
Fortunately, there are some free resources online and even places where you can get one-on-one help without paying. For example, the nonprofit Student Loan Alliance (SLA) runs the website StudentLoanHelp.org, where you can get one-on-one counseling.
Your Turn: Do you have student loan debt, and how do you plan to pay it off?