If you need to know how to pay off student loans fast, follow the three debt tsunami repayment plan. With this strategy, prioritize paying off the highest interest loan with the highest rate. While making minimum monthly payments on all other loans, dedicate any extra money to the high interest loan with the greatest interest rate. Then, make sure you make a large enough monthly payment so it is paid off as soon as possible.
The second step is filing jointly for your student loans. By filing jointly, both of your tax returns are included and can be used together at the end of the year. A joint filing is usually much cheaper than a situation where you file as an individual. In addition, a tax deduction of up to $1000 may be claimed if the married couple has filed joint returns.
You can also take advantage of a standard repayment plan. Under this plan, you make one payment for each of your student loans at the current interest rate plus the amount of interest that are being paid. If the balance is paid in full at the end of the year, your interest will be added to the end of the grace period and added to your next payment. For students, the standard repayment plan often provides a small amount of money to help cover living expenses while they are finishing school.
A borrower can also choose an extended repayment plan. Extended repayment plans allow borrowers to extend the length of time they have to pay their loans. Borrowers can decide to make five, ten, or twenty years of payments. During this time, the borrowers will still make payments at the same interest rate plus the amount of interest that are being paid on the loans.
If a borrower chooses to use extended repayment plans, it makes sense to compare them to traditional payment plans. One way to compare these programs is to look at the amount of time the payments will be reduced. This can add up to considerable savings over the long term. When comparing these repayment plans, it is important to look at what the payment will be for the first five years versus the twenty-year period of standard repayment plans.
There are also several options for how to pay off student debt faster. Paying off the balances in full, allows borrowers to enjoy all the benefits of immediate repayment. However, extra payments may not be practical, especially if those payments would be included in the total cost of attendance. Some students choose to make just one extra payment per month and spread the cost of extra payments over the course of the year.
Another strategy for paying off student loans is to pay off the balances in full as quickly as possible. For those who have an abundance of available credit, this can often be the best option. In many cases, it is possible to deduct the amount of interest paid on an outstanding balance from the tax refund. This strategy is not feasible for all borrowers because many loans are not eligible for tax refund deductions. The borrowers should check with their particular lenders to find out which types of student loans qualify for these tax refunds. If the loan was subsidized, these funds could be channeled toward the outstanding balance and used to reduce the total balance very quickly.
The most financially advantageous way to pay off student loans is through a combination of extra cash and extended repayment plans. If a borrower does not have the money, the repayment plan option can be a viable alternative. Borrowers should remember that in order to pay off student loans faster, they must be committed to making the minimum monthly payments. This commitment is much like making a payment on a credit card each month; the more time the student has before their debt is due, the longer the extra cash will have to come from savings or income.