So did you recently graduate and now have a fancy degree to flaunt? But with that, you also have tens of thousands of dollars as student loans.
Student loans are supposed to be helpful: you borrow money to complete your higher education, get a degree and explore better job opportunities, and in turn, have more earning power.
Depending on your repayment plan, paying off your federal loan can take 10-25 years. And that too, when you strictly adhere to the schedule. These student loans can be an albatross around your neck for years, but with some useful tactics and strategies, you can get rid of these student loans fast while also saving money.
Tap into Your Employee Benefits
Surprisingly, Americans are sulking more under college loans than the credit card or auto debt. Nonetheless, according to the data from the Society for Human Resource Management, only 8% of large enterprises contribute to student loan financial aid programs.
This perk can prove to really valuable for employees though. This is why companies like Fidelity, Aetna, and Chugged offer their employees anywhere from $1,000-$10,000 per year toward their student loan payments.
So when you review your employee benefits package, check if your employer offers any student loan repayment help – like programs that match your student loan payments or a set amount to be put toward your loans. Not only will this save money over time, but it will also create some room in your budget to pay off debt while saving for other goals like retirement or mortgage.
Get Strategic with The Debt Avalanche Method
Do you have multiple loans to pay off? Fret not, we have a trick up our sleeve that can save you money. Use the debt avalanche method. Pay down the loan with the highest interest rates, then the second-highest interest rate next, and so on.
Use an expense tracking software to keep track of your debt payment process. The goal is to minimize the amount of interest you pay. Following this approach can save you tons of money as it significantly reduces the higher interest rates, allowing you to repay your debt well ahead of schedule.
Start Paying Off Loan During Your Grace Period
Grace period is the time period after your graduation to the time you’re required to begin repayment on your loans. It usually lasts from six months to a year, based on what kind of loan you have.
If it is possible for you to begin repaying the money as soon as your graduate, start paying down your student loans during the grace period. However, chipping away at loans during the grace period doesn’t mean your interest will be at a halt. The interest will grow, but making payments during the grace period will save you a great deal of money.
Let me make it more clear: when you begin making payments earlier, the interest rate accrued on that balance also becomes much less, resulting in you paying less over time.
This could save you thousands of dollars over the life of your loan.
Set Up Auto-pay from Your Bank Account
It is a good idea to talk to your loan service about earning interest rate reductions. One effective way to do this is by enrolling in auto-pay on your student loans. When your monthly payments are automatically deducted from your checking account, you have less to worry about. Moreover, in exchange for setting up auto-pay, most lenders are likely to reward you with a 0.25% interest rate reduction.
Claim Deductions On Your Taxes
It is important that you get cashback on your federal income tax return. When you file your taxes, claim the tax credits and deductions that you are entitled to as someone paying off student loans. The Student Loan Interest Deduction permits taxpayers to deduct an amount of up to $2,500 in interest paid on federal and private student loans. Plus, this student loan interest deduction is an above-the-line deduction, so it doesn’t require you to itemize deductions to claim it. This way, you can take a tax deduction for any student loan interest that you paid, up to $2,500 a year.
These qualified loans, however, only include loans taken for education expenses of yourself, a spouse or a dependent. Any loans from qualified employer plans or relatives won’t qualify for this deduction.
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