The last thing a final year student wants to think is how to repay the student loan. Between trying to find work and adapting to living in a new city, the prospect of having to return a $40,000 loan with a 4.5% interest rate is neither bright nor encouraging. Still, there is no room for despair. It can actually be done, but it takes time, determination and most importantly, a plan. This short guide is all about making a plant and teaching you how to make a transition from being thousands of dollars in debt to being debt-free.

Why Paying Student Loan Earlier?

The first sand the foremost reason is because you will save money. If you have aforementioned $40,000 loan with the interest rate of 4.5% to pay off over 20 years, you will pay 20,700 in interest. However, if you decide to pay it off in 10 years, you will save about $11,000. And that is a lot of money, especially for a young person struggling to set up a home and a new life. You can buy a car for that amount. What is more, getting out of the debt gives you more freedom to pursue a lower-paying job that you like more, to travel or to take another debt, for your house perhaps.

Think Positively

Nothing can persuade you that you can achieve something like a strong and sincere belief that it is possible. It may sound like a cliché but it really helps. Don’t ever lose the though that you are paying for your education, which is the gateway to your career options and your development as a person. Then there is the huge benefit of having paid it, a sense of relief and all the possibilities that open up before you once you are through.

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Make a Plan

In order to get started with repaying you need to find about how much you need to pay each moth to pay off your student loans in a desired time period. You can use a loan repayment calculator or your banks proprietary online service tools. Learn all about terms and conditions of your loan, for example if your interest rate is fixed or variable, in order to avoid potential complications. Finally you need to establish a budget, which is not only part of your repayment strategy, but your general financial welfare.

Consolidate Loans

This option is not recommended for everybody, but grouping several smaller loans into a big one carries the convenience of having only one servicer on mind. However, loan consolidation makes it harder to use the debt snowballing technique , which stimulates you to pay off the smallest debt first, than “snowball” the money that you were putting aside and use it for the next biggest debt, and then the next one.

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Benefits of Auto-Debit

What auto-debit option implies is that your loan servicer deducts our payment from your bank account each month. This method has several benefits to it, while some loan servicers may even give you a discount if you enroll. Another benefit is that you actually pay yourself first, as you dedicate a specific amount of your next paycheck to be directly deposited to your savings account.

Pay more each Month

When you pay extra money each month you are given an option of lowering your next payment or continuing with the planned payment program, with the extra amount automatically lowering your loan principal. Even if you paid more than enough for the next month, state it clearly that you want to pay the usual instalment next month.
While sometimes it is wiser to pay off other loans before the student loan, especially if they have higher interest rate, otherwise, it is always better to clear the student debt before continuing with your life.

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