Five Ways to Pay Off College Loans Fast

5 Ways to Pay Off College Loans FastFor a successful career, most people must earn a college degree. However, obtaining an education is typically a costly endeavor. Once you’ve left school with your diploma, you’ll likely be facing student loan repayment obligations. Five ways to pay off your college loans fast include:

  • Developing a plan
  • Pretending your college loan is a mortgage
  • Starting early
  • Opening your own student loan repayment account
  • Limiting your living expenses

Form a Plan

To pay your college debt off fast, establish a plan to eliminate it within three to five years. A payoff goal will give you peace of mind since you’ll have an end date for your financial obligations. However, to accomplish this, you’ll need to commit to your payoff plan. Embrace the payment in the same way that you would your rent, car loan or smartphone bill. Limit your discretionary spending, and develop a set budget. Consider establishing automatic payments as this will decrease your temptation to spend. Also, if you get a bonus or extra paycheck, be sure to send it to your college loan balance.

Pay it Like a Mortgage

If possible, treat your college loan like a mortgage by making large payments to lower the principal of the balance faster. For instance, if your student loan balance is $27,000 and the bank charges you an interest rate of 6.8 percent, then a 10-year repayment plan would require you to pay about $310 a month. However, if you can increase the payment amount by $500 or more a month, then you can decrease the years. Paying more will decrease the loan’s principal balance quickly, which results in lower interest charges. Making payments more frequently will also decrease these charges.

Begin Paying Early

If you can handle a busy schedule, consider taking on a part-time job while you’re still attending college (also see: What Are the Advantages to Working While Attending School Full Time?). This will allow you to begin paying your student loan debt before you start your career. Try to find employment that’s related to your chosen field to create industry contacts. By taking this step, you may gain a leg up in your line of work. Early employment gives you real-world work experience, and it will help you develop discipline. It will also offer you a way to lower your future debt obligations. When you work and attend school, you’ll be taking the initiative to keep your college debt under control.

Open a Repayment Account

Try to set aside an extra $100 to $200 or more each month to deposit in a savings account. This action will help you speed up the repayment process. To avoid the temptation of spending these funds, be sure to set up an account that’s separate from your current checking or savings account. Once it is established, consider connecting it to mutual funds, stocks or annuities as this will allow the amount you save to grow. After you’ve accumulated a large sum, pay down your college loan. The time that it will take you to repay the loan will depend on your rate of return.

Lower Your Living Expenses

If possible, move back home with your parents to decrease your housing costs. If this isn’t an option, look for the cheapest possible place to live. Cities like San Francisco, New York and Chicago have a high cost of living, so consider taking a job outside of the major cities until you’ve paid off your student loan debt. Also, don’t use credit cards while you’re paying off your student loan. This will help you focus on one area of debt. Avoid buying a new car for as long as possible. Try to wait about two or three years. If you delay taking on a car loan, you’ll be able to pay your college debt off more quickly.

For Success

With financial discipline, you can pay your college loan off fast. To succeed, plan ahead and avoid making many large purchases. Also, be sure to live within your means, and focus your efforts on getting out of debt.