Student loan debt is often an ominous and frightening topic that is avoided at all costs until landing a first job out of college.
While many graduates make it a financial priority to quickly pay off student loans, it takes 20 years on average to pay back loans for an undergraduate education, according to a report by the Education Data Initiative.
But, there are strategies that can assist graduates in quickly and efficiently paying off their student loan debt.
Making biweekly payments
While most people only make payments toward their student loans once per month, making payments once every two weeks will result in an extra payment each year, according to Forbes.
In practice, biweekly payments are made by dividing the typical monthly payment amount in half and making half-payments once every two weeks. Over the course of a year, these biweekly payments will result in 26 half-payments, equal to 13 full payments.
Paying only once monthly would amount to 12 full payments, but paying biweekly and making 13 full payments annually could help to pay off loans ahead of schedule and save on interest costs.
For those who do not want to make extra payments, refinancing student loans is an option. Refinancing entails changing from one lender to another who offers lower interest rates.
Typically, the new lender is often a private company, such as a bank, credit union or online lender, according to Forbes.
Candidates for refinancing must have a high credit score, a reliable income and a debt-to-income ratio below 50%, according to NerdWallet.
Refinancing can help in paying off student loans early and can save thousands of dollars in interest, but it has drawbacks. Switching to a private company removes the benefits that come with federal loans, including income-driven repayment plans and loan forgiveness programs, according to Forbes.
‘Found’ money and windfalls
Budgeting unanticipated cash or income toward student loans is another ingenious way to make headway on student loan payments.
The notion of ‘found money’ refers to money that legally belongs to someone, but is considered unclaimed, according to Government Information Services. This can include money from previous employers, money from state property offices and insurance and tax refunds.
Found money can be categorized as a ‘windfall,’ which is any money received that was not anticipated, according to Forbes.
Those who wish to pay off their student loans faster can benefit from allocating windfalls toward their loan repayment.