Being saddled with student loans can make life difficult. When you’re out of college or university, you’ll likely already have a heap of regular bills to pay, and the monthly hit from a student loan payment on top of those isn’t a welcome addition. Your personal credit rating will also be tied to paying off your debts on time.
So to ease the challenge of post-secondary loans, it’s best to pay them off as soon as possible. These simple tips can be a big help in achieving that goal.
This is a simple one to start with, but it’s something a lot of people forget to do. Sit down and draw up a budget with your monthly income and monthly loan payment requirement, and make sure you set aside funds to make the minimum payment. If you have more free money at month’s end, consider putting it towards you debt.
Reduce the debt through lump sum payments
In other words, put as much money as you can spare into paying down your student debt, when that money becomes available. If you’re still in school, you can get an early start by putting money towards the loan before you graduate. One good reason to do this (if possible) is that the money will pay down the loan principal, which will also reduce the total amount of interest you’ll pay going forward. Any lumpsum payments after graduation will first be applied to any interest that accumulated since your last payment, with the rest going to the principal.
Hike the monthly payment amount
Every month, there will be a minimum pre-set amount to pay on the loan. This figure covers interest, and some of the principal. However, if you pay more, you’ll lower the total amount of interest to be paid over the course of the repayment period. For example, with a $25,000 student loan at a 5.5 percent interest rate, the interest alone will reach roughly $7,500 over the loan duration. But if you add another $100 to your monthly minimum payment rate, you can reduce the interest toll by about $2,600.
Tap into federal student loan tax credits
The interest paid on a student loan is eligible for a federal tax credit. This means that the taxman will give payments made on both federal and provincial loans a 15 percent credit. Remember to apply for this credit before you file your taxes.
Hopefully these tips will get you on the track to speedy student loan repayment.