Are you one of the 20 million people who attend college each year? If so, the odds are that you’ll graduate owning money on student loans. In fact, of these 20 million, around 12 million or about 60% borrow money via student loans to help pay their costs. There are about 37 million Americans with outstanding student loans today. And here are even scarier statistics– as of 2012’s first quarter, the under 40 age group had the most borrowers (14 million) followed by 10.6 million in the age 30 to 39 group, 5.7 million in the category of 40 to 49 and 4.6 million in the age 50 to 59 category. I mean can you even imagine that 30 years from now you’d still be paying on your student loans? Ouch.
How much do you owe?
If you graduated this year the odds are you owe around $29,000 as this is the average amount of debt for today’s graduates – which is up from $23,450 just six years ago.
Get the facts
If you graduated in the past two or three months, you’re still in your six-month grace period or that number of months before you need to start repaying your loans. If you’re typical you probably have multiple loans from multiple lenders. If so, you need to go to the National Student Loan Database (https://www.nslds.ed.gov/) as it will have all the information on your federal student loans including.
- Type of loan
- Original amount of loan
- Date the loan was first issued
- Amount of money distributed
- The loan holder or servicer
- Amount you currently owe
Make a plan
The NSLDS also includes a Student Loan Portfolio. Make sure you store all the information about your federal student loans in your Portfolio so you can then make a plan for paying off your debts.
Two crazy ways to pay off student loans fast
There are a number of “conventional” ways to repay your student loans and some that can only be called crazy.
The first of these is selling shares in yourself. That’s right. You might actually be able to sell shares in yourself – an idea that was first proposed nearly 60 years ago by the economist Milton Friedman.
The way this works is that you’d get people to give you money upfront in exchange for a percentage of your future earnings. These are called Income Share Agreements (ISAs) and new companies such as Lumni, Upstart and Pave are promoting this invest-in-people option to help talented persons get money for their educations. Representative Tom Petri and Senator Marco Rubio have introduced legislation that would increase the use of these investment alternatives by formally defining ISAs.
A second crazy way to pay off student loans is to do what one University of Buffalo graduate did. He had $32,000 in student loan debts with useless degrees in History and English – leaving him with no real job prospects. He was determined to make money and moved to Alaska where he worked as a maid between his fourth and fifth years of college and then went back after he had graduated as a van tour guide. At one point he canoed across Ontario, Canada to transport people called “voyageurs,” and did other odd jobs until he was able to totally pay off his loans in just three years.
9 conventional ways
If you’re not interested in canoeing across Ontario or selling shares in yourself, there re other, more conventional ways to pay off your student loan debts are here are nine of them.
The first important step towards paying off your student loans is to make a budget. This isn’t just an important part of repaying your loans, it’s a critical part of achieving financial independence. When you have a budget, you can allocate money for repaying your student loans and everything else you need to pay for in life. A budget will not only help keep your spending under control, it can serve as a road map for achieving your short- and long-term goals.
Get into a better repayment plan
If you do nothing, you will automatically be put into the 10-year Standard Repayment Plan. As you could guess, you’ll have 10-years to repay your debts with a fixed monthly payment. But that might not be your best option. There are a variety of other repayment plans including Extended Repayment, Graduated Repayment and Income-Contingent Repayment. You should check these out, as one of them could be a much better option – and with lower monthly payments – than the 10-year Standard program.
Ask your employer
This won’t help with current loans but if you’re planning on going on to grad school, your employer might be willing to pay for it. While colleges are most likely to offer this benefit, there are other companies that have pay-for-school programs. Even if your employer doesn’t have such a program, it wouldn’t hurt to ask and you might be surprised at the answer.
If you do have multiple federal loans you might be able to save money with a Direct Consolidation Loan. The interest rate on these loans would be the weighted average of the interest rates on your existing loans rounded up to the nearest 1/8th of a percent. This means it would be higher than your lowest interest rate but lower than your highest. Plus, you’d have many more years to repay the loan so would have lower monthly payments.
Sign up for auto-deductions
If you were to enroll in auto-deduction, your loan servicer will automatically deduct your payment from your bank account every month. The benefit of this is that some loan servicers will give you a discount just for enrolling.
Volunteering in the Peace Corps or AmeriCorps would help you pay off your student loans while doing some good. Both these programs offer some type of education award or partial loan cancellation, plus they will pay your living expenses during the time you’re serving.
Talk with your co-signer(s)
The odds are that the co-signer on your student loans was your Mom or Dad. This means they’re probably also responsible for them. Since they were there to help you attend college, they might be willing to help you succeed in life. If you’re having a tough time repaying your loans, your parents might be willing to supplement your payments or match your funds.
Pay More Than Required Each Month
This might be a bit obvious but the fastest way to get rid of those student loan debts is by paying something extra every month. As you may know when you make a payment, you first pay off whatever interest accrued since your last payment and the rest goes to reducing your principle balance or the amount you owe. If you pay more than required, you could have the extra amount used to pay down your loan principle.
There are programs and websites where you earn rewards for paying down debt or spending money. In some cases, the money you earn can be used to pay down your loans. In fact, some of these programs are education specific so you put any credits you earn directly to paying down your debt.