Are you in a situation where your primary financial obligation is to pay off your student loans? If paying off your student loans feels way far away, or even worse, totally impossible, don’t worry. We’ve got you covered. Yes, paying off your student loans can seem totally overwhelming, but it doesn’t have to be. With the right plan, it can be dealt with a lot of ease.
Whether you’ll be graduating from college soon or you’ve been trying to close those student loans for years, you can make a plan for paying off student loans quickly.
We have some tips that we’d like to share with you which can get on a fast track to paying off your student loans as soon as possible. Paying off your student loans takes time, hard work, and a whole lot of sacrifice, but it’s totally doable. So let’s make it happen!
1. Get a Part-Time Job While Studying
Even though most parents or families have got you covered during the course of your education, it is still is good idea to find a part-time job (if your schedule permits) and start saving towards your student loans. Saving and putting aside money earned during this time in a savings account will help ease up the whole process of loan repayment, once you start working. It’s a great feeling to start earning your own money. Having a backup savings account can give you some peace of mind and make room for the little joys you’d like to indulge in as a working professional.
2. Master the Art of Budgeting from the Beginning
It’s easy to go overboard with your spending when you start earning your own money. There’s a sense of freedom that comes with being able to make your own decisions with respect to your finances. However, managing personal finances requires a lot of learning, unlearning and relearning based on where you are in your financial journey. And the foundation of effective money management is to work with a budget. Get into the habit of creating and sticking to a budget plan right from the beginning. It’s important for you to know how much money you’re making and where your earnings are going. Since you already have an obligation to pay off your student loans, ensure that this payment goes under essential expenses before you allocate your money for anything else. Missing your student loan EMIs can cost you more interest and can impact your credit score.
3. Put Aside Any Extra Money That You Make
Whether you receive a joining bonus, a raise or a yearly bonus, allocating those additional funds to your student loans is a great long-term investment. Doing so can enable partial payments, reduce your principal and lower the total interest you pay over the life of the loan.
4. Automate Payments
Enabling automated payment system is a way to enforce not only payments but also savings. Make an arrangement for automatic payment to be made towards your student loan at regular intervals. The amount paid and the interval at which such payments must be made can be pre-decided by you.
5. Prioritise Your Monthly Instalments
In case you have multiple student loans to pay off, some with variable interest rates and others with fixed interest rates, pay off the variable rate loans faster. Even if the current variable rate is lower than the fixed-rate, this is sensitive and susceptible to change. A sudden hike in the interest rate following changes in the economy may catch you off guard. As an additional step, check with your financial institution if a conversion of variable rate loan to fixed-rate loan is possible.
6. Refinance Your Student Loans With Lower-Interest Loans
Consider refinancing your loan if you are able to work our a better deal for yourself. If you have a steady income and good credit, you might qualify to refinance your student loans. Refinancing involves taking out a new loan and using the funds to pay off the old loan. You could opt for a new term length, a lower interest rate or both with the option of refinancing.
7. Take Full Advantage of Tax Deductions
Once you avail an education loan, the interest paid (which is a component of your EMI) on the education loan is allowed as a deduction under Section 80E of the Income Tax Act. This deduction is available for a maximum of 8 years or till the interest is repaid, whichever is earlier. This can help you save on your taxes while you take charge of your student loan repayments.
If you’ve ever wondered whether paying off your student loans early is worth it, you now have the answer. There are many benefits to reap by paying off your student loans early. The sooner you get rid of your student loans, the sooner you can start working on other important financial goals such as saving for a house, saving for marriage, building your investment portfolio, planning for emergencies, planning for retirement, etc. Hope you’re all motivated to pay off your student loans as quickly as possible. So, make a plan and get started today!