Pay Your Student Loans Off Faster
By Megan Morrow
Published August 20, 2019
Most college graduates receive a diploma – and debt. About 70 percent of graduates face student loans, averaging more than $37,000. Today, more than 44 million Americans owe almost $1.5 trillion in student debt. If you or someone in your family is staring down a long-term student loan bill, you may be wondering if you should aim to pay them off early and how to do so.
Depending on loan interest rates, it is often wisest to focus on saving for retirement and emergencies first, eliminate credit card debt next and then focus on repaying student loans. Before you get started, ensure all of your loan paperwork is in order, including balances, interest rate, monthly payment, and whether the loan is federal or private. Then, the following five tips can help reduce student-loan debt ahead of schedule:
- Pay more when you can. While not everyone can make extra payments every month, windfalls or small savings of any amount can make an impact. An annual bonus or salary increase, holiday gifts, tax refunds, or funds from wedding gifts, for example, can help you reduce the overall balance in a notable way.
- Pay off private loans first. Typically, private loans come with higher interest rates and less flexibility than federal student loans (which offer deferment programs as well).
- Make biweekly payments. This simple tip can save you a year’s worth of payments or more. If you make auto-payments on the 15th and 30th of every month, you will feel less burden by splitting the bill in half; even better, you will end up making 26 payments per year (or 13 months) instead of the typical 12 months of payment.
- Refinance and consolidate. Sometimes taking out a new loan, using that to pay off your previous loan, can give you a better interest rate or payment terms. If you have more than one loan, consolidation can help you simplify the repayment process.
- Be savvy about your job search. Some companies and non-profits offer loan forgiveness programs; akin to tuition reimbursement programs, repayment assistance recognizes employee efforts and rewards them with partial or full repayment. While the number of organizations offering this perk is still relatively small, it is growing.
While it is always wonderful to pay those loans off in full, student loans are rarely a top priority when it comes to preparing for retirement and managing debt. A financial advisor can help you assess your financial picture and craft a plan for priorities and repayment.
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The material presented here is for information purposes only and is not to be considered an offer to buy or sell any security. This report was prepared from sources believed to be reliable but it is not guaranteed as to accuracy and it is not a complete summary of statement of all available data. Information and opinions are current up to the date of publication and are subject to change without notice. The purchase and sale of securities should be conducted on an individual basis considering the risk tolerance and investment objective of each investor and with the advice and counsel of a professional advisor. The opinions expressed by Ms. Morrow are strictly her own and do not necessarily reflect those of Herbert J. Sims & Co., Inc. or their affiliates. This is not a solicitation to buy or an offer to sell any particular investment. All investment involves risk and may result in a loss of principal. Investors should carefully consider their own circumstances before making any investment decision.