Have student debt? Most Canadians do. Canadians, especially Ontario post-secondary graduates, have some of the highest student debt in the world. Recently the Ontario Government has subsidized post-secondary for low and average income families. This is great for the for those who are preparing to attend post-secondary, but what about the people who have graduated already and have thousands of dollars of debt? According to the Provincial Government of Ontario, you are out of luck. You will have to pay off your debt in full while the next generation does not. Do not be completely discouraged. Here are some great tips to pay your student loans faster in 2018! Following this guide will bring you closer to financial independence and being debt free. If you want a simple solution, debt consolidation can be a great option. Being debt free is a goal we all strive for, so let’s go over the top 5 tips to paying off your student debt!
Pay Off Your Student Loans Faster In 2018
Forbes–Dec. 20, 2017
Is 2018 the year you finally pay off your student loans?
For many, the answer is no.
According to Make Lemonade, there are over than 44 million borrowers who owe more than $1.4 trillion in student loan debt.
The good news is that when it comes to getting student loan debt under control, the ball is in your court.
Even if you can’t pay off your student loans now, there are ways to alleviate your debt burden and live a better financial life.
Here are 5 action steps to help pay off your student loans faster in 2018:
1. Make an extra student loan payment
One of the best strategies to pay off student loans faster is to make an extra payment.
Since there are no prepayment penalties, you can make extra payments of any amount.
For example, always pay at least the minimum payment each month. In addition to making 12 monthly payments per year, consider an extra payment once every three months for a total of 16 payments per year.
Contact your lender in writing and explain that you want to make additional payments several times per year.
Be sure to specify that you want to apply any extra payment above the minimum payment to principal only (not to next month’s monthly payment) to limit the amount of interest that accrues.
Without this instruction, your lender will hold the excess payment and apply it to next month’s payment – which means you would pay more interest.
2. Pay more than the minimum payment
The minimum payment, as its name suggests, is the minimum payment you should pay each month.
However, you can pay more than the minimum payment with no penalty.
Why would you pay more than you have to? Remember, interest is always accruing on your principal balance. So paying any amount more than the monthly minimum can reduce the cost of your student loans.
Make Lemonade’s student loan prepayment calculator can show you how much money you can save by paying off your student loans faster each month by paying more than the monthly minimum.
For example, let’s assume you have $100,000 of student loan debt at a 7% interest rate with a standard 10-year repayment term.
By paying only $100 extra per month, you can save $4,696 in interest costs and pay off your student loans 1.08 years earlier.
3. Make a lump-sum student loan payment
Your first inclination might be to spend your annual bonus or tax refund on a vacation or other personal purchase.
However, the wiser move is to apply all or a significant portion toward paying principal on your student loans.
Make Lemonade’s lump sum extra payment calculator shows you how much money you can save with a one-time, lump sum student loan payment.
For example, let’s assume that you have $100,000 in student loans at a 7% interest rate and a 10-year repayment term.
If you make a one-time, lump sum payment of $2,000, you would save $1,703 on your student loans and pay off your student loans 4 months early.
4. Apply for loan forgiveness
While student loan forgiveness may not continue as a federal program (in its current form or at all), Public Service Loan Forgiveness and Teacher Student Loan Forgiveness are still available to qualifying individuals.
Public Service Loan Forgiveness is for student loan borrowers with federal student loans enrolled in a federal repayment plan who are employed full-time in an eligible state, local or federal public service job or 501(c)(3) non-profit job who make 120 eligible on-time payments.
Teacher Student Loan Forgiveness is for full-time teachers with five years of teaching experience in a designated elementary or secondary school or educational service agency that serves students from low income families.
5. Refinance your student loans
Student loan refinance is often the single best strategy to lower your student loan rate.
Student loan refinance enables you to pay off your existing student loan and assume a new student loan with a lower interest rate.
There are multiple private student loan lenders who offer interest rates as low as 2.50% – 3.00%, which is substantially lower than federal student loans and in-school private loan interest rates.
You can choose either fixed or variable rates and loan terms ranging from 5 to 20 years.
Each lender has its own eligibility requirements and underwriting criteria, which may include your credit profile, minimum income, debt-to-income and monthly free cash flow.
To maximize your chances of being approved to refinance student loans, you should apply simultaneously to multiple lenders.
Now that you know what to do, apply it! Take control of your finances today. Do not think “Oh, I will start this method when I have more income” because that type of thinking does not work. The best time to do pay off a loan is today. The article only provided tips, but did not provide a guide. Here is a guide to clearing your student debt quickly!
Step 1 – Make a plan and stick to it!
Make a budget for each week and month. The budget should include your income and how much spending money you have after bills and expenses like rent. If you agree to put 15% of your net income to your student debt, you better not break it. If you overspend one week or month, you have to balance it by investing more money in your debt the following payment. If you are inconsistent with the amount you choose, you will continue on a trend of paying less and less each payment. This is how most people start and end. Don’t be one of those people.
Step 2 – Look for the best deals
Let’s say you have 30% of your income to spend, but you use 25% for this like eating at restaurants, phone bill, and the random items on Amazon. You need to limit yourself from these unnecessary expenses. Change your phone plan to something cheaper, cook food in advance to prevent eating at restaurants, and that item you want on Amazon is probably not needed. Instead of buying it right of way, keep it in your wish list for two weeks. If you still need it after those two weeks, buy it. If you forgot about it, you might not need that item after all.
Step 3 – The more people the better
If you are living by yourself or with a partner, please consider moving. This is not something everyone can do, but for the people this applies to, please consider this step. If you can move back with your parents, do it. If you are living by yourself and cannot move back with your parents, get roommates. If you are living with a partner, get roommates or move in with their family. If you can save money on rent, do it. This will make paying off your student loans two times easier. If you are serious about paying off your debt, this is the most important step. Yeah, it might not be fun living with parents or roommates for some, but you will be debt free in less time.
Now you know everything to pay off your student debt quickly this year. If you enjoyed this post, please share it! The less debt we have, the better the Canadain economy will be!
