Ways to Lower and Eliminate Student Debt

Student debt can be detrimental to anyone's finances. And unlike some loans, there are very few ways out other than paying your way out. Following are a few tips to help you lower and eliminate student debt.

Make a Plan

Organization is the key to a good many things in life. Instead of flying by the seat of your pants, you'd be better off to make a plan and stick to it. Don't make the mistake of thinking you need to eliminate the debt immediately before you can get on with your life. The best way to approach lowering and finally eliminating your student debt is to create a budget that will allow you to slowly but surely chip away at the loan until it's paid off. Keep in mind the story of the tortoise and the hare–by patient, persistent effort the tortoise won the race–mostly because the hare was easily distracted. With money in your pocket you could also become distracted and spend money on new cars and clothes instead of earmarking that income for loan repayment. The sooner you pay off the loan, the quicker that extra money can go into your pocket to be used for whatever you deem appropriate.

Pay Attention to Interest Rates

You more than likely have more than one student loan and probably from various sources. Take the time to organize all the documents that have to do with your student loans. Categorize them according to due date and interest rates. By paying off the loans that have higher interest rates first you will be able to eat away at the debt quicker, leaving more money available to pay toward the other loans.

Start a Savings Account

Although you may be tempted to put every cent of your extra income toward paying down your student loans, you should instead consider starting a savings account with some of the money. Because the financial status of the country is in a state of flux right now, you never know when you might be in need of a few extra bucks. By having money in a savings account you will have something to fall back on in case of an emergency. If something bad should happen that makes it impossible for you to make a monthly payment and you don't have access to an emergency fund you may end up paying a stiff penalty–i.e. late fees or even an increase in interest rates. However, if you can simply cover that payment from your savings account you'll be able to avoid the late fees or implementation of higher interest rates. Once you've cleared up the emergency you can begin making regular payments again.

Other Debt

If you have other debt with a higher interest rate than your student loans, you may want to pay them off first. Just like with your high-interest student loans, the quicker you pay them off the more money you'll save on interest. Whether or not the high interest loan is a student loan or some other variety of debt, you should make an effort to pay more than the minimum amount each month. Be sure and let the lender know that the extra money is to be applied to the principal. In this way your debt will decrease quicker.

Pay On Time

It won't make any difference if you send a check to cover a high-interest loan payment in an attempt to lower your student loan if you don't make sure the lender gets the check by the due date. By paying on time you ensure the money will actually go toward eliminating your student debt and not to cover late fees.

Loan Forgiveness

For people who are entering the workforce as teachers or public servants, there are programs available to help you eliminate student loans by forgiving the debt. For teachers, there is the Teacher Loan Forgiveness Program, and for those entering public service there is a Public Service Loan Forgiveness Program. These programs were instituted to help defray the cost of loan payments for people who are deemed to be providing a publicly needed service.

There are requirements to be met in each program, but it might be worth looking into. If you qualify, you could be out from under your student loans much faster than you normally would. By doing a little Internet research, you could find out if you qualify for either of these programs. Other sources, such as the Peace Corps or AmeriCorps have similar programs. For further information visit www.studentaid.ed.gov.

Loan Consolidation

Another way to get rid of your student quicker is to consolidate your loans. Many people borrow money from varying sources so they end up with a number of different loans to pay off. By consolidating the loans into one payment, you can often reduce the interest rates, thereby lowering the monthly payment. Use the extra money to pay ahead and your loans will be paid off quicker.

Guest post from Taylor Harris. Taylorwrites about the best online schools for BestOnlineColleges.com.

People who read this article also read:

1. Guide to Repaying your Student Loan
2. Applying For A Student Loan While Receiving A Bad Credit Score
3. Qualifying For Student Loan With Bad Credit History