How to pay back school debt as soon as possible?

2018 marks the year in which American citizens have more student loan debt than ever before. In average, we are talking about $39,400 owed by each graduate of 2017, which represents an increase of 6% compared to previous year. In total, in 2018, about 44 million borrowers owed a total of $1.48 trillion. That sounds pretty scary, right? Especially when you think that an important amount of your paycheck will be swept away to pay back your student loan debt. But paying back your debt doesn’t have to take forever. With the right strategy, you can make the student loan debt go away faster and in this article we’ll provide some insights on how to achieve this goal.

First things first: if you don’t know the exact amount that you owe as student loan, you can find this out by consulting the “National Student Loan Data System” – for your federal loans and “AnnualCreditReport.com” for your private loans.

Once you know how much you owe and to whom, it’s time to define a system that will help you get rid of your debt fast, that will enable you to stay focused in getting this done and, of course, that will allow you to live a decent  living. You will need to create a payoff dates plan, that you will confirm with the loan providers and then you will have to stick to it. So, here are the methods you can use to pay back your student debt as soon as possible:

        1. Curb down your expenses

This might sound drastic and guess what? It is, but it’s only for a limited period of time. You can save money that will go to your student debt payback by one or more of the following ways:

  • Cook and eat at home, instead of going out to restaurants;
  • Take home-cooked lunch at the office, instead of spending money on the expensive food at the cafeteria nearby;
  • Preserve your gadgets and electronics to last longer rather than investing money in new ones;
  • Move to a cheaper rent apartment, move in with your parents or split your expenses with a roommate;
  • Buy medium price clothes from the consignment shops and thrift stores, instead of purchasing expensive clothes that will go out of fashion pretty fast anyway;
  • Use public transportation or ride a bike instead of buying a car – this will not only save money for your budget, but will also have benefits on your health and on the environment;
  • Define a “no spend month” in which you will not buy anything new and instead put the money in the student loan refund.

These are only few of the methods you can use in order to curb down your expenses, but the options are unlimited. By using your creativity and determination, you can save money through any means and thus allocate higher amounts to your student loan debt payback. 

        2. Use the strategy that fits you

The financial expert Dave Ramsey has promoted the “debt snowball” method for payment of debts. You can apply this strategy also to your student loan payback, especially if you have several loans of different amounts.

“List all your debts, smallest to largest, regardless of interest rates. Make minimum payments on everything to keep them current, and attack the smallest debt with a vengeance.”

Why should you use the strategy recommended by Ramsey? Because its efficiency consists in the motivational boost you gain in order to continue to work until full payment of loans.

Another strategy that might fit you is the so called “debt avalanche”, promoted by Harlan Landes, one of the first names in the personal finance domain.    

Simply put, you list your student loan debts by their interest rates and make payments towards the highest-rates loan first. This will enable you to pay faster the interests, which can vary on longer periods of time and then remain with just the fixed-amounts rates of your loans.

You can use any of these strategies or even a mix of the two, because the final goal is to pay back school debt as soon as possible.

          3. Get a job that offers forgiveness

Another method you can use to refund your student loan debt faster is to get a job that offers partial or full forgiveness of these loans. You can find such a job in the public service area, in teaching or healthcare domains or even join state-based programs that provide such an option.

There are two main requirements in order to benefit from this type of job: meet all the criteria imposed by the job to get accepted and complete the term required in order to obtain the forgiveness. The payments made as a result of holding such a job will decrease your debt, but its correspondent interest rates remain unaffected by these payments, which means you will have to continue to pay the interest.

Also, there are also loan repayment assistance programs (LRAPs) that you can join and if you qualify, you can obtain payments of your federal or private loans in exchange of the work type requested by the programs’ issuers.

The only thing you need to pay attention to, in the two cases stated above, is to what happens to your debt payment in case you decide, after a period of time, to switch to a job that doesn’t provide the forgiveness of the loans, so you don’t find yourself in a worse position than before.

         4. Refinance your student loan debt

The objective of loan’s refinancing is to decrease the interest rates of your student debt. With lower interest rates, more of the money paid will go directly to the debt’s decrease, which means you will be able to pay back your school debt faster. The refinancing rates can be below 3% and if you have more student loans, you can consolidate all of them into one refinanced loan, which will have lower interest rates than one or more of the loans taken separately.

One thing to check before proceeding with refinancing your student loan is if by doing so you risk to lose some of the protection provided by federal loans.

         5. Make the payments of debt automatic

One of the most efficient methods to pay back school debt as soon as possible is to set up an automatic payments scheme. This means that every time you get money into our account, a percentage of that money will go directly towards your debt loan decrease. This method is efficient due to several reasons:

  • you avoid spending on something else money that you actually need to use for student loan payment;
  • you pay more from that debt each time you make more money – if, for example, you work on a side gig or you obtain a salary increase or a bonus, more of that extra amount will automatically go towards the decrease of your student debt;
  • you can benefit from a slight reduction of interest if you set up automatic payment (the reduction can be around 0.25%)

The percentage you define as being allocated to the payment of your student loan is entirely up to you. Once you analyze all of your fixed expenses and make a plan for what you want to accomplish with the money earn, you are ready to indicate that percentage – either 20, 30 or 50% and ask for automatic payments from your account issuer.

          6. Motivate yourself

This method is linked to … imagination. Yes, apart from all the concrete tools described above, you need to work also with an imagination tool when it comes to paying back your student loan debt as soon as possible. This imagination exercise consists in envisioning what your life will look like after you finish refunding your student loan debt. What new experiences will you be able to try? Maybe travelling? What new things will you be able to learn? Maybe join a workshop of Japanese writing? What things will you be able to buy? Maybe a new car instead of the one that is currently breaking down every 10 miles. Will paying back your school debt have any impact on your state of happiness? If the answer to this question is “yes” and if you really want to do, to learn, to have some of the things described above or any others, then you can surely make it! You can choose any of the methods listed above or combined techniques. As long as you are willing to make a sustained effort (or “a conscious deliberate determined effort” as motivational speaker Les Brown would put it) for a limited period of time of your life, you will surely manage to pay back your school debt a lot faster and live a happier life!