If you have student loans, you’ve probably asked yourself how you can get rid of them, for good. I’ve gone so far as to look into refunding my college degree. No dice. If you’ve done research on this topic, I’m sure you’ve found people who rant and rave about having their student loans paid off for free! All you have to do is sell your soul, or join the army. No biggie. But what about real people who can’t join the army and can’t sell their degree on the black market? No worries, my friends. I have real life, easy peasy, solutions to pay off student loans in half the time!
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How To Pay Off Student Loans In Half The Time
Treat Your 30 Year Like A 15 Year Loan
Ok, I know talking about amortization tables isn’t the most exciting topic (you probably slept through that class in college). But, understanding compounding interest can save you a ton of money! Possibly tens of thousands of dollars… It’s about to feel like math class all over again. Let’s take a look at an example shall we?
- $30K Loan balance
- 6% interest
- 30 year term
You – Monthly payments of $280 (extra $100 per month)
- $280 x 153 months = $43,084 lifetime payments
Other Guy – Monthly payments of $180
- $180 x 360 months = $64,800 lifetime payments
By putting an extra $100 per month towards your loans, you could save $20k! You would also pay off your loan in less than 13 years (opposed to the guy taking 30 years), which means you’ll now have $280 a month to save or invest. Compounding interest isn’t so boring now, is it? Ok, it’s still boring, but saving $20k isn’t! Feel free to test out this free calculator with your own loan amounts.
Reader Tip: When your loan is paid off, celebrate! Then, start investing the $280 back into a college savings fund for your child (preferable one that EARNS compounding interest). That will get you out of the student loan trap once and for all!
Refinancing is essentially taking out a completely new loan, at a new rate, and using it to pay off the existing loan. If we used the previous example, it would take that 6% interest and decrease it! Think back to when you got your student loans: credit score, income, debt – these probably all looked way different in college than they do now. You were a riskier customer at the time, which means you probably didn’t get the best interest rate. Now that you’ve improved your credit score, your income has increased, or you’ve paid off debt, you might be eligible for a much better rate! I firmly believe in refinancing any of your loans. It’s the easiest way to save thousands of dollars over the life of your loan! I refinanced with SOFI and instantly shaved $100 off my minimum monthly payments. Their customer service is amazing, rates are some of the lowest you can find, and the application is TOTALLY FREE! Even if you are unsure, I recommend filling out an application just to see what kind of rate you could get from SOFI. They even show you how much money you’ll save, which is pretty motivating in itself.
PS – Our readers get a $100 bonus when refinancing through our SOFI link!
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Lump Sum Payments
You know that tax refund you get every year that usually goes towards something frivelous and unecessary? I challenge you to put your annual refund towards your student loans this year! Making a 1 time payment that is significantly larger than your minimum payment due will go towards decreasing your principle. Remember when we talked about compounding interest? This is quick and easy way to impact the interest you pay over the life of the loan.
Read Here For: How To Spend Your Tax Refund Like A Boss
Your Next Step: Fill our your free SOFI refinance application. It never hurts to ask! Once you hear back from SOFI I’d love it if you left me a message in the comments with how much they are going to save you!
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