Repaying a student loan is a project that can take between 10 and 30 years. And, during this time, the debt can affect all aspects of your family life, from hindering your ability to secure a mortgage to causing the levels of money-related stress in your household to skyrocket.
Luckily, there are multiple strategies that can help you tackle this burden and repay your student loan faster while raising young children.
Get started with the ones below- but don’t forget that partnering with a specialized financial advisor might prove invaluable!
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- Create a Long-Term Budgeting Plan
- Sign Up for Auto-Pay Programs
- Look Into Refinancing Your Student Loan
- Apply for Student Loan Forgiveness Programs
- Use Your Tax Refund To Make an Extra Payment Towards Your Loan
- Take Advantage of Employer-Sponsored Assistance Programs
- Increase Your Income With a Side Hustle
- Use a Windfall To Repay Your Loan in Full
Create a Long-Term Budgeting Plan
The first step to repaying your student loan faster is to take a hard look at your family budget. Having a thorough understanding of your income, monthly cash flow, financial inefficiencies, and unnecessary expenditures can help you improve your spending habits and reallocate your funds toward repaying your student loan.
Although there are many budgeting strategies you can test out, an efficient long-term strategy is to use easy-to-follow methods such as the 50/30/20 rule in combination with budgeting apps.
Sign Up for Auto-Pay Programs
Enrolling in auto-pay programs can help you boost your trustworthiness as a borrower and access up to a 0.25% discount on your loan’s interest rate. What’s more, when setting up automatic repayments, your student loan company will automatically deduct your monthly rate from your bank account, thus helping you avoid late payment fees.
The benefits of this strategy are undeniable - but, when signing up for auto-pay programs, make sure that you’ll have the necessary funds in your bank account every month!
Look Into Refinancing Your Student Loan
Refinancing your student loan is an option worth looking into, especially if your financial situation or credit score has improved since you first took out your loan. For example, when refinancing student loans with SoFi you can access Annual Percentage Rates as low as 4.24% and save between $2,500 and $8,500.
Before choosing to refinance your student loan, be sure to meet all eligibility criteria, use a loan refinance calculator, and work towards building a solid credit history.
Apply for Student Loan Forgiveness Programs
In August, Biden’s administration announced a student loan relief plan that aims to cancel up to $20,000 in student debt for borrowers with an income of $125,000 or less (or $250,000 for families with a joint tax return). So, checking that you are eligible for this program can make a difference in how much student debt you’ll have to repay.
Nonetheless, there are other student loan cancelation and forgiveness initiatives worth looking into, including:
- Public Service Loan Forgiveness
- Teacher Loan Forgiveness
- Income-driven repayment forgiveness programs
Use Your Tax Refund To Make an Extra Payment Towards Your Loan
Every year, eligible borrowers can deduct up to $2,500 on the taxes paid on their student loan interest. Although these funds can help you in many ways, one of the best options to boost your financial situation is to use them to make an extra payment towards your student loan.
Take Advantage of Employer-Sponsored Assistance Programs
If you are employed, you should consult your employer or HR manager to check whether there are employer-sponsored assistance programs available within your company. Indeed, under the CARES Act, employers can now contribute up to $5,250 a year towards an employer’s student loan debt.
Increase Your Income With a Side Hustle
Increasing your income with a side hustle is a great way to better handle the occasional unexpected bill and stabilize your income. But, even more importantly, creating an additional income stream can play a major role in helping you counteract the effects of your student loan debt while you are in the process of repaying it.
Indeed, as you boost your income, you’ll be able to lower your debt-to-income ratio, access better mortgage options, and improve your household’s cash flow.
Use a Windfall To Repay Your Loan in Full
Whether it comes from inheritance or investment returns, financial windfalls can be a blessing to your whole family’s financial life.
But choosing how to use it can feel overwhelming! Of course, investing in them can help, and it is certainly tempting to treat yourself to a holiday or big purchase. However, using it to extinguish your debt can be the smartest move in the long term!