By, Patricia Briggs
In the US, many (if not most!) students are forced to take out loans in order to manage their college expenses. Student loan debt outweighs credit card debt and is growing at a rate of $90 billion a year. Paying off student loans takes years. Therefore, formulating a repayment plan outside of minimum payments is important. Believe it or not, there are some innovative ways to pay off the student loan debt.
5 Tips on how to reduce your student loans
1. Make extra payments towards your loans so that you can pay off the owed amounts in less time. Review your budget plan to track where you can curtail to pay off the student loan debt. Even a minimum payment of $20 extra every month can significantly lower the total owed amount.
You can either distribute your extra payment amount to each student loan or solely focus on paying off one debt at a time. If you choose to focus on one loan, there are two common ways of looking at it. Mathematically, you’ll pay less interest if you put your extra payments toward the loan with the highest interest rate first. But for many, paying off the smallest loan first allows you to see your progress which is more psychologically rewarding. Choose whichever method you feel will help you sustain your extra payments!
2. Consolidate your multiple student loan debts. Low interest consolidation loans help eliminate your student loan debt quickly. You can combine your multiple debts into a single low interest loan to make your monthly payment affordable.
3. Consider student loan forgiveness programs. Get information from your state or federal government on whether you qualify for the student loan forgiveness program. The Peace Corps and AmeriCorps are agencies that offer assistance to people who are under student loan debt. But their eligibility criterion is that the person seeking help has to commit to serve with them for a specific period of time. There are several programs out there, do your research and see if one is a good fit for you!
4. See if your employer offers any benefits to people with student loan debt. Some employers contribute a stipulated amount annually to employees who have student loan debt.
5. A Ms. Career Girl favorite, you can also take up a part time job or start a side-business in order to put more money towards paying off your debt more quickly. If you get bonues from your present job, consider putting the money toward your student loan debt if it is in line with your short and long-term goals.