If you’re like many college graduates, you’re managing a boatload of student loan debt. U.S. borrowers are now carrying an estimated $1.5 trillion in education loans. That can make it difficult to achieve other financial goals, such as building emergency savings and contributing to a retirement account.
“Many people face the challenge of balancing student debt with planning for their financial futures,” said Carl Gagnon, assistant vice president of Global Financial Wellbeing and Retirement Programs at Unum. If you’re feeling the pinch, use these seven smart ways to take charge of your student loans and pay them off faster.
1. Make biweekly student loan payments.
A secret weapon you can use to pay down student loans (or any type of loan) faster and cut your interest expense is to make accelerated or biweekly payments instead of monthly payments.
This strategy works for all types of installment loans and mortgages because you take advantage of the fact that one month out of each quarter has five weeks instead of four. There are thirteen weeks in each quarter, not twelve; and there are fifty-two weeks in a year, not forty-eight.
So, making biweekly payments is a sneaky way to get the equivalent of one extra monthly payment made each year. That additional amount works wonders toward paying down a loan faster, which means you pay a lot less interest over time.
This strategy works especially well if you get paid every other week, so you can budget the biweekly loan payment to occur close to each payday.
2. Refinance your student loans.
Doing a refinance means that you pay off one or more of your higher-interest loans with a new loan that has a lower interest rate. There are private lenders that may refinance student loans for as little as 2% or 3% with repayment terms ranging from 5 to 20 years.
Paying less interest means you can pay more toward your principal balance each month, which pays down your loan faster and allows you to easily save money.
Every lender’s underwriting requirements for refinancing will be different, so shop and compare offers from several companies to make sure you get the best deal.
3. Find out if you qualify for student loan forgiveness.
If you work in certain industries or professions, such as medicine, teaching, or public service, you may qualify to have some, or all, of your student loans forgiven. You typically must stay in an eligible job for a certain amount of time and may need to work in geographically underserved areas of the country.
However, even if you do have a portion of your student loans forgiven, it’s typically considered income. For example, if you earn $50,000 and have $5,000 of student loan debt forgiven, you’d owe income tax on $55,000 instead of $50,000.
4. Automate your student loan payments.
Many lenders discount interest rates slightly when you set up automatic payment for your student loans. That gives lenders confidence that you’re less likely to miss a payment and gives you a way to pay off your student loans a little bit faster.
5. Use windfalls to pay your student loans.
As tempting as it can be to spend a gift, bonus, or tax refund on a luxury item, remember that using a windfall to pay down your student loans is the easiest way to get rid of them faster.
6. Work for a company with student loan benefits
Companies are warming up to the idea that helping workers improve their financial wellbeing is good for business. Brands including Unum, Aetna, and Staples have added student loan benefits to their menu of perks.
Top employee benefits company, Unum, is offering an innovative program to help workers tackle student debt. Starting next year Unum employees can turn up to five days of unused paid time off (PTO) into a payment against their student debt. This program will be managed by financial services provider Fidelity Investments.
According to Gagnon, “This first-of-its-kind Student Debt Relief Program, along with a range of other financial benefits and resources, provides Unum employees more tools to reduce financial stress and improve overall wellbeing.”