Paying off your federal student loans can take 10-25 years, depending on which repayment plan you're using. That is, if you stick to the schedule.
Certain strategies can help you speed things up and zero out your student loans faster — and help you save money in the process. Here are three to consider:
If you can afford to begin making payments as soon as you graduate, start chipping away at your student loans during your grace period. That's the period of time between when you graduate and when you're required to begin repayment on your loans. It can last six months to up to a year, depending on which loans you have.
"A lot of people don't realize that a grace period doesn't mean your interest won't grow during that time," says Carolyn McClanahan, a certified financial planner with Life Planning Partners in Jacksonville, Florida. "If you can begin making payments during your grace period, that will save you money."
The earlier you can begin making payments, the less interest that will accrue on that balance, and the less you'll pay over time: You could save thousands of dollars over the life of your loan.
Only around 8% of large employers contribute to student loan financial aid programs — although that's double the percentage that were doing so just a few years ago, according to data from the Society for Human Resource Management. This perk can be valuable, though. Companies like Aetna, Chegg, and Fidelity offer their employees anywhere from $1,000-$10,000 per year toward their student loan payments.
When you're reviewing your employee benefits package, see if your employer offers any student loan repayment help, such as programs that match your student loan payments or offer you a set amount to put toward your loans. Not only will this save you money over time, but it will also give you room in your budget to pay down debt while saving for other goals like a mortgage or retirement.
Even an extra $25 per week can make a big difference when it comes to student loan repayment. Scraping together the money may seem like a tall order, but you can save by finding creative ways to trim your budget or by taking on a side hustle.
The math can be motivating. Let's say you owe $37,172 in student loan debt, which is the average balance owed by 2016 college graduates, and that your interest rate is about 5% on the combined balance over four years. If you stick with the standard 10-year repayment plan for federal loans, you'll pay about $395 a month for the next 10 years.
Adding $25 per week to your payment — so, dedicating about $495 a month instead of $395 — your repayment timeline would be cut down by 29 months and you'd be able to pay off your loan in full in a little over 7.5 years.
"There are great student loan payment calculators. Just plug in what an extra $20 a week could do for you," says McClanahan. "You'll see that any extra little bit you can put towards your loans will help."
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