The Fast-Forward Way to Pay off Student Loans

Students are winding down and getting ready to graduate from college. This also means that college loans become due typically 6 to 9 months after graduation.
With these 5 steps you can manage that payment and get it paid off much sooner than the loan term expects you to.

The average student loan in 2014 was approximately $33,000 per student and on average, can take decades to pay off. Given that you normally have a 6 month "cushion" before getting started on payments, its best to start getting ready to pay it off now rather than later.

1. Take stock of all your debts
   Make a list of all of your other debts, along with the interest rates associated with each debt. Both numbers will be important to prioritizing which debt to pay off first.
   
   But I thought we were paying off the college loan first?
   That will come, but there's a reason to prioritizing your debts. A typical student loan can be about 4-8%, a car loan 1-6% and credit cards at 19-24%. Paying off a high interest rate debt makes your money go further since now less interest will get charged on that lower principal.


2. Refinancing loans
   Out of all of your debts, see which can be refinanced even lower. Cars, homes and some student loans can sometimes be refinanced into lower rates. This means less interest paid and can also help reprioritize your debts.


3. Don't use emergency funds
   It may be tempting to start dipping into a retirement fund or emergency savings to pay off your debts, but as much as you can, don't. Simply put, retirement is for retirement and emergencies are for emergencies. Using a retirement fund comes with heavy tax penalties. If you run into an emergency, you may get forced to paying with a credit card instead. Those usually have the highest interest rates and this can set your goal of repayment back by years.


4. Look to cut costs
   If you don't need it to survive, then put it off for now. That daily coffee-delight drink adds up over days over years. Re-evaluate your situation: Maybe you can live with family or find roommates, or you can do without cable or a phone.


5. Continue payments as though haven't paid it off yet
   Why would I do that?
   People who usually pay off a debt are relieved that they now have $xxxx free. This usually justifies them getting into debt again. Rather than thinking that way, apply whatever you used to pay to a previous debt towards a new debt. So if you were paying $100 a month to your credit card, apply that extra $100 towards a new debt.
   This is also called snowballing payments.

These tools should help you get your debts paid off, and especially that pesky college loan that lingers around forever.

If you still need help, speaking to a financial advisor can help with budgeting, debt prioritization and payment planning. NAC members get full access to financial advisors that will help you get on the right track. Click the button below to join and find out more!


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