To kick this off I want to note that I am not a finacial advisor, all of the below are tips that I have personally found helpful and may not work for everyone. Please be sure to do your own research before making any impactful financial decisions.
- Apply for student loan forgiveness
This is such a great opportunity! If I qualify I will be two years closer to completely paying off my loan. The form was super easy and takes less than five minutes to fill out. The deadline is 10/31 so if you haven’t submitted yet hurry up and do so! https://studentaid.gov/
2. Monitor my balance
My mom is amazing and she did significant research on loan interest rates before helping me choose my loans. She also made payments on the interest the entire time I was in college. It wasn’t easy as the longer I was at school the higher the interest became but it helped to make my loans manageable. Once I started making my loan payments but I didn’t know my balance. I had written off my loans as something I’d be paying for the rest of my life. Once I started paying more attention to the balance and how it changed over time I began to have more hope.
3. Make large payments
When I’m able to, I make two thousand to five thousand dollar payments from my savings into my loan. It’s beneficial because it applies a significant amount to the principal and saves on interest. I’ve been working to increase my savings with the goal of having a 6 month best egg which allows me to make larger payments. The trade off is I have less in case of emergency funds but I’m still comfortable with the overall amount that’s available.
4. Refinance my loans
In 2018 my brother helped me to refinance my loans. We both had multiple loans from NJCLass all at various interest rates. By refinancing we were both able to get lower rates moving from 7-8% down to 3-4%. I recommend doing research and vetting a few student loan refinancing partners before making your pick.
5. Put more money into the principal
When I began paying my loans I paid the monthly payment but a friend of mine recommended checking what percentage of my payment applied to the principal. This is because loan lenders set the monthly payments to apply a larger percentage to the interest and only pay a small amount on the principal. This will lengthen the time it takes to pay off the loan. My recommendation is to get familiar with your payments so you can work to increase the amount going to your principal and shorten your loan payoff time.
6. Open a high-yield savings account
I’ve been reading articles online to learn more about finances and came across high-yield savings accounts. Many national banks don’t provide high-interest rates on savings accounts offering less than 1%. For example, my PNC account offers a 0.03% Annual Percentage Yield Earned. In comparison, high-yield savings accounts range from 2-3%. Going back to my example, moving from PNC to high-yield savings my annual percentage yield APY increased by +72%! The high-yield savings account I opened is online only which allows them to cut regular banking costs and offer higher rates. There are some drawbacks like slowness to move funds and not having a physical location but the pros outweigh the cons to me personally.
7. Set a payoff goal date
There are student loan calculators you can use to determine the remaining number of months left on your loan based on the loan total, the interest, and the monthly payment. When I first used the calculator last year I had 55 remaining months, roughly 4 and a half years remaining. One year later I have more than halved my remaining months now down to 26 remaining payments, a little over two years.
Please leave a comment if you have any tips for paying off student loans. I’m a big believer that knowledge is power and appreciate the insight.