How to Pay Off $30,000 in Student Loans
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Getting through college is stressful enough, but add debt to that equation, and the situation goes from bad to worse. EducationData.org estimates that the average federal student loan debt balance in the U.S. is $37,014. The standard repayment plan for federal student loans says students pay off the money in 10 years. But 10 years quickly become 20 if you're making minimum payments. While these payments may be easily manageable, they drastically extend your repayment timeframe.
But repaying debt can be an overwhelming task. You have to stick to a budget and ensure every extra cent is going toward repaying the money you owe. But, at times, you may feel your payments are barely moving the needle. Because your loans accrue interest, minimum payments don't really put a dent in your loan balance. But here are a few strategies you can undertake to repay $30,000 in student loans in a few years.
Related: The Best Apps for Debt Repayment
In this article
Strategies to pay off $30k in student loans early
Make extra payments
The most water-tight way of ensuring your student loans are paid off early is by making more than the stipulated payment. You can use different strategies to make extra payments like paying after every two weeks instead of monthly payments. This way, you can pay off about 26 debt installments annually instead of just 13 yearly payments. You can utilize a student loan calculator to assess how fast you can become debt-free. Through the calculator, you can analyze how additional payments will affect your debt and how many auxiliary deposits you ought to make. You can also consult your lender to customize different methods of making numerous and collective payments.
If low-income individuals may find it tough to make extra payments. If that's the case, you could:
Begin a side hustle: The gig economy has afforded people many opportunities to earn money. If you have a car, you could drive for Uber or Lyft, or deliver food for DoorDash. Both are legit side hustles that pay decent money if you stick to them. And if you don't have a vehicle, you could babysit, become a dog sitter or assemble furniture for some extra money.
Get a roommate: Sharing your space isn't ideal, but a roommate can considerably reduce your cost of living. Instead of every expense falling on you, you now have someone to share rent and utilities with. As your expenses fall, it'll free up more money for you to direct toward extra payments.
5.54% - 15.86% VARIABLE rate APRs 3.54% - 14.83% FIXED rate APRs
- Easy online application!
- No origination fees, late fees, and no insufficient fund fees
- Flexible repayment options to help you find the right loan for you
- Student loans for college, graduate, law, MBA, Health Professionals, and Parent loans
- Students are 5x more likely to be approved with a cosigner
- 0.25% discount when you set up autopay
Refinance your student loans
Refinancing affords you a favorable loan term, including lower interest rates. Refinancing loans can help borrowers pay off their student loans without making additional payments. You shouldn't have any trouble refinancing the loan if you enjoy a good credit score in the high 600s, a reliable source of income, and a debt-to-income ratio of less than 50%. However, the refinancing option may not be suitable if you do not wish to avail income-driven repayment and loan forgiveness.
Look into loan forgiveness
Uncle Sam has a few student loan forgiveness programs that apply to direct loans made by the government, as well as Stafford loans. If you are a government employee or that of a qualifying nonprofit organization, you may be eligible to have the remainder of your balance forgiven under the public service loan forgiveness program. And if you're a mathematics, science, or special education teacher, you can have $17,500 of your federal direct or Stafford loans forgiven under the teacher loan forgiveness program.
But of course, there are several conditions attached, and each program has its own eligibility requirements.
Traditional debt payoff strategies
Debt snowball method
The debt snowball method is a debt-reduction strategy to pay your debt in ascending order from the smallest amount to the largest. People who follow this strategy tend to repay the money they owe in 18 to 24 months. To make this work, you should:
- List all of your loans, including student loans, from the smallest balance to the largest, irrespective of the interest rate.
- Then, pay the minimum amount for each debt, but any extra money you have should be added to the loan with the smallest balance.
By beginning with the small debt, you remain motivated due to quick wins in the start. Overall, however, you end up paying more money with the snowball method.
Debt avalanche method
The debt avalanche method is a debt-reducing strategy says you should pay your debts in descending order of the highest interest rates. This plan helps you eliminate hefty interest rates first, making the student loan repayment journey less stressful. It works in the same manner as the debt snowball method:
- List your debt (personal loans, credit card debt, student loans) in order of interest rates, starting with the highest.
- Make minimum payments for each debt, but for loans with the highest interest rates, try to make more than the minimum payment.
You can save money and time by prioritizing and arranging your debt and playing smart.
Automatic payments
You may be eligible for a discount if you have automatic payments enabled. Many lenders, including private student loan lenders, will reduce your interest rate by 0.25% if you have auto payment enabled. Autopay helps you stick to a schedule, meaning you'll never have to make late payments (and thus hurt your credit score). It also gives lenders visibility into their future financial performance, hence the 0.25% discount.
Student loan fund
Many people save money for emergencies, while those who can also put money on the side for vacations. The same can be done for your student loans. If you only have a few dollars extra each month to put into debt payments and think they wouldn't have much of an effect, you can instead open a high-yield savings account and deposit any extra funds there. Once you have a few hundred dollars in there, you can simply use all the sum toward making extra payments on your student loan.
Stay committed
If you've accumulated a lot in student loans, getting demotivated along the way is easy. But perseverance, determination, and consistency are key to achieving any goal. Making debt payments on time, cutting down on discretionary expenses, and getting a side hustle, can do wonders for borrowers – that's personal finance 101. Unless you are 100% committed, repaying loans, and everything that comes with the process, may get uncomfortable.
In addition, you should skip the grace period, which is the difference between when your graduate and payments are required. Even if you can pay $50 a month, they'll go a long way in reducing the interest you're charged.
Temporary help
Some find consolidating student loan debt into one can make the debt more manageable. Consolidation can be helpful if interest rates are lower or the life of the loan is shortened, so you save money in the long run.
5.54% - 15.86% VARIABLE rate APRs 3.54% - 14.83% FIXED rate APRs
- Easy online application!
- No origination fees, late fees, and no insufficient fund fees
- Flexible repayment options to help you find the right loan for you
- Student loans for college, graduate, law, MBA, Health Professionals, and Parent loans
- Students are 5x more likely to be approved with a cosigner
- 0.25% discount when you set up autopay
How long does it take to repay student loans
No crystal ball can predict when you'll become debt-free, but student loans are generally repaid in 10 to 25 years. Barack Obama, for example, was in his 40s by the time he received a clean sheet. According to EducationData.org, it takes an average of 20 years to repay your student loans, with some graduates taking as much as 45 years to pay off the debt. Bad news if you're a medical school graduate - the starting salary isn't enough to make student loan payments, EducationData.org says.
The bottom line
Ineffective debt clearing strategies can be a nightmare for borrowers and make a bad situation worse. Conversely, an efficient and structured plan may mean you can pay off your student loans effortlessly. Strategies like making extra payments, refinancing to secure favorable repayment terms, exploring loan forgiveness programs and remaining consistent can successfully assist borrowers in timely paying their debts and attaining financial freedom. With good financial habits and disciplined planning, students can get rid of their debts within a few years. In addition, your loan amount also determines how quickly you can become debt free.
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Writer
Jasir Jawaid is Joy Wallet's Assistant Editor. He has more than 13 years of experience as a journalist covering Wall Street, equities, financial policy and regulation, and cryptocurrency and blockchain.
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