At this very moment, there are tens of thousands of students who are stuck in some amount of student loan debt. Their debts can range from thousands to tens of thousands to even hundreds of thousands of dollars.
Getting out of student loan debt isn’t an easy task, so students should do whatever they can to reduce said debt. Fortunately, it is possible to reduce debt due to attending college, and every amount paid off will help in the long run.
Even better, there are tons of ways a student or a recent graduate can reduce their debt and pay off those student loans. Here are some of the best ways to reduce that student loan debt!
Pay off as much debt as possible while in school.
While in school, most students won’t be required to pay back their loans because they will have a deferment. With federal subsidized Stafford loans, a student won’t even be charged interest on their loans. Too many students fail to take advantage of their deferments and lack of interest payments by not paying off their loans during this prime opportunity.
In reality, this period of time is the best opportunity to reduce student loan debt because there is no requirement to pay yet and the student might not be charged interest. Paying back debt during this period is essentially paying back money for a flat price instead of being charged interest.
A student can reduce their debt even if they are charged interest because their payments and overall balance will be lower by the time they graduate. Therefore, all students should repay their loans while in school as much as possible.
Take advantage of interest rebates and reductions.
Typically, many lenders will reward students with a rebate or a rate reduction on their loans if certain requirements are met. Students usually receive an interest rebate on federal loans if they pay on time for a few months.
Also, most lenders will offer a quarter of a percent reduction in the interest rate if a student has payments automatically debited from their bank account. Sure, a quarter percent might not seem like much, but doing anything possible to reduce the interest rate is a great thing because a person will end up repaying less money.
A student can get other rebates or rate reductions in rare cases, such as loan consolidation, but this occasion won’t always occur. In the end, an interest rebate can save a student a hundred dollars or more on their loans, while a rate reduction can end up saving a student quite a few dollars if they repay the loan quickly.
Return the money that you don’t need.
Luckily, a student can return some of the money they borrow from the federal government or a bank if they don’t want or need it. Some lenders or banks will let you do this for 120 days after the loan money is disbursed, while some institutions have lower return periods.
Still, all students should take advantage of this if they borrow more money than they need. It might seem enticing to take some extra money to purchase something new, but a student will end up paying a lot more in interest on their loans. Therefore, any extra money should be returned to the lender right away so that the principal balance on the loan is reduced.
Spend time earning scholarships.
One way to reduce student loan debt is to stop the need of student loans beforehand. Of course, students can do this by earning scholarships, which is money that doesn’t need to be repaid to anyone.
Every student should give scholarship hunting a try, whether it involves filling out an application or submitting an essay. Nobody should have too much trouble earning a scholarship or two. By doing so, a student could earn $500 to $1,000 in scholarships with very little effort, which would reduce their financial aid need by that same amount.
Obviously, the student would either not take out as much in student loans for the coming semester or they would repay their current loans. Earning scholarships can save a student thousands of dollars in loans and interest throughout their college careers.
Use federal work-study in place of student loans or use it to pay off loans.
Not every student will be accepted for federal work-study, but the program is extremely useful for students that need extra money for college. Fortunately, this money is untaxed, and the job is only part-time.
All students with work-study and student loan debt should use their work-study money to repay their loans. Of course, the student could replace work-study with a student loan too. Since the money isn’t taxed, a student will end up paying less to repay their debts because they’ll only be paying their loan and interest down rather than being taxed on their earnings too.
Federal work-study is the perfect answer to a student who needs a lot of financial aid but doesn’t want to deal with tons of student loans. On the other hand, it’s also a great way to pay down student loans.
Get a partial cancellation on some of your student loan debt.
It is completely possible to get student loan debt canceled through various means. For certain reasons, such as becoming a teacher or serving in the military, the federal government will cancel some or all of a student’s debts.
Basically, students get rewarded for joining the military or going into a particular career field. This option is incredible for students that were already planning on going into a career that would make them eligible for a cancellation of their debt.
A student should always check if their future career path makes them eligible for cancellation of some or all of their student loans because it could end up saving them thousands of dollars in the end.
Borrow money from friends or family members.
Okay, this method works multiple ways. A student could borrow money from family or friends in place of a student loan or they could borrow the money to pay down their loans to avoid the accumulated interest.
Of course, only a student who manages their finances well should consider this option. They should try to find friends and family members that will take a same amount repayment without interest within a year. The student should then put all of this money toward repaying their student loans.
Obviously, loans that are paid down will accumulate far less interest, and the student will simply repay what they borrowed to whoever without interest. This method is extremely useful for lowering principal balances on student loans and avoiding high interest accumulations.
Make use of automatic transfers to pay down debt.
As mentioned previously, a student can get a quarter percent rebate on their student loan interest rate if they use automatic transfers from their bank account. This is also useful because the money will always be debited from the student’s account on a regular basis.
So then, a student won’t have to think about repaying their student loans because it will always be taken care of whether or not a student does it themselves. Automatic transfers help a student pay off their loans quicker because they will never have to worry about a payment being made as long as their account has enough money in it.
Make use of self-employment to pay off student loans.
No, I’m not telling everyone to start their own small business or become completely self-employed. Students should consider, however, doing some things on the Internet or through other channels to earn some income on the side that they can put toward paying off student loans.
For instance, a student could sell their old stuff on eBay or Craigslist. He or she could write content for different sites, such as this one. On the other hand, a student could even start their own website or blog. Sure, they probably won’t be able to pay off all their loans through this method, but they can definitely use the extra money to reduce their debt.
Pay down private student loans before federal loans.
Private student loans gather interest as a student goes to college – no matter what. Subsidized federal loans, however, do not gain interest while a student is in school. Therefore, all students should focus on paying off their private loans first because they will have a higher interest rate and can end up costing the most in the long run.
Always focus on repaying private student loans before federal ones to avoid paying too much money in interest. Of course, interest will accumulate pretty quickly for a private loan while a student is in school. Most federal loans will just sit there doing nothing, unless they are unsubsidized. Even unsubsidized loans will gain interest at a lower rate. So then, always focus attention on repaying private loans first.
Student loan debt isn’t the worst thing in the world.
Most students that are “drowning” in student loan debt really aren’t doing too much to pay off their loans. In reality, it isn’t impossible to pay back thousands or even hundreds of thousands of dollars in student loan debt if a person uses the right tactics.
The key is to repay loans as soon as possible while focusing on higher interest loans first. Students who wait until they have graduated college to start repaying their loans are making a huge mistake because interest can gather very quickly on a loan – no matter what the interest rate is.
For your own well-being, don’t make the same mistakes that other students make when it comes to managing student loan debt. You’ll regret it in a few years.