According to the Department of Education, more than 61.4 million Americans owe more than $1.44 trillion in student loans. In fact, the average student loan debt per borrower is about $29,300. This can lead to an all-too-familiar problem: student loan debt can become a huge barrier to entering the workforce. But there is hope if you are willing to put in the work.
Interest rates on federal student loans have increased in recent years. In fact, the interest rate on federal student loans has risen 8 times in the past decade, and has been steadily increased at a rate of 2.5% per year, on average.
The average student loan debt in the U.S. is over $30,000, and around 50% of college graduates are carrying loans. It’s no surprise that student loans are now the second largest debt category in the country, after mortgages. With so much debt, it’s no wonder that many people don’t pay them off in full, or at all. But even if you’re only able to pay a small percentage off, it’s still a good idea to make some strategic financial decisions along the way.. Read more about how to pay off student loans in 5 years and let us know what you think.
Whether you have a few thousand dollars in student debt from your undergraduate degree or a six-figure loan amount, paying off your student loans early has numerous emotional and financial advantages.
Repayment periods for private student loans usually vary from five to twenty years. Payback choices for federal loans vary from a 10-year plan to a 20- or 25-year income-driven repayment plan. Borrowers may be able to make payments for up to 30 years under a Graduated Repayment Plan in certain circumstances.
However, that is a long time to be burdened by school debt.
Many borrowers prefer to pay off their student debts as quickly as possible. This is how you can pay off your school debts in five years.
What is the best way to pay off college debt in 5 years?
You may save hundreds of dollars in interest by paying off your student loan in five years. However, it has the potential to improve mental health and free up money for other financial objectives, such as saving for a home or preparing for retirement.
Here are a few tips to help you pay off your student debt in less than five years.
1. Use a student debt payback calculator to get inspired.
You’ll need a clear understanding of your existing repayment plan and how additional payments will impact it if you want to pay off your student loans as soon as feasible. Visualizing how much money you may save on interest can be very motivating and set the tone for your debt repayment journey.
Let’s suppose you owe $50,000 and have a 10-year payback period with an average interest rate of 6%. Your monthly payment is now $555.
Using our Student Loan Payoff Calculator, you can see that by adding $400 per month to your monthly payment, you can pay off your whole amount in five years. Over the life of your loan, you’ll save approximately $8,500 in interest and be free of student debt forever.
2. Make use of the refinancing ladder for student loans.
Consider refinancing your student debts if you’re determined to pay them off quickly. A student loan refinancing is a fantastic method to save money on interest and get cash back, which may help you pay off your debt quicker.
Throughout the life of their loans, many borrowers only refinance once. However, by restricting yourself to just one refinancing, you may be losing out on significant student loan interest savings and cash-back incentives.
There’s a refinancing method that student loan debtors frequently miss, and it may help you pay off your loan in five years. The student debt refinancing ladder is what it’s called.
Here’s a quick rundown of how the refinancing process works:
- Begin by switching to a long-term loan. When you want to pay off your student debts in five years, this may sound counterintuitive. Refinancing to a long-term loan (e.g., a 20-year term) enables you to obtain a lower interest rate while also allowing you to pay less toward your student loans if necessary. It’s a good idea to pay off your debts in five years, but life may get in the way. A safety net is provided by the long-term loan.
- Make large prepayments to reduce your debt. Make the largest amount you can, even if your minimum payments are modest. This will help you pay off the principle on your loan quickly.
- Refinance to a cheaper interest rate after that. Refinance to a shorter repayment period (e.g. 7-, 10-, or 15-year term) with a new lender after you’ve paid off a significant part of your debt. Because your overall amount is considerably smaller due to big prepayments during your initial refinancing, your monthly payment shouldn’t alter too much.
- Continue to make large prepayments. Make significant extra payments to keep chipping away at your debt.
- Refinance for the third time, this time for a five-year period. Refinance to a five-year, fixed- or variable-rate loan with a new lender after your loan amount is one-third or less than your initial loan sum.
Each time you utilize this method, you should refinance with a different private lender. If you choose one of our partner lenders, you may be eligible for large cash-back incentives that you may use toward paying down your debt.
3. Check to see whether you’re eligible for student loan reductions.
This is a simple method to guarantee that more of your payment goes toward principle rather than interest. Most lenders provide an autopay discount (for example, a 0.25 percent interest rate decrease) just for enrolling in automatic payments.
Other discounts, such as a loyalty discount for using several financial products, may be available from your lender. Check with your lender or loan servicer to see if you’re qualified for any student loan reductions that may help you save money.
4. Look for methods to save money while staying within your budget.
Making significant additional payments is one of the most important aspects of paying off your student debt in five years. Where does the additional cash come from, though?
Begin by looking over your existing budget to see where you might cut costs. Any money you save should go toward your school debt.
Many costs may be cut without making significant lifestyle adjustments. For example, unless you conduct your own research and request an adjustment directly, there are often promotions or updated prices for service providers (e.g., mobile phone and internet) that you will likely be unaware of.
Consider if you can eliminate certain expenditures entirely over the next several years. Landscaping expenses, subscription goods, gym memberships, and salon services are all examples of budget items that may be decreased or removed altogether.
Other options for lowering your costs include:
- Changing budgeting categories such as food, transportation, and recreation.
- Obtaining a roommate to split living expenses such as rent and utilities.
- Swapping your high-priced vehicle payments for a paid-off secondhand car or one with significantly cheaper monthly payments. Consider giving up your car for the next few years while you pay off your student debts if you reside in a region with excellent public transit alternatives.
When you’re making sacrifices to pay off your student loan debt in five years, every dollar matters. Rework your budget until you’re happy with it, then search for additional methods to make money.
5. Use a side business to supplement your income (and pay off your school loans).
Consider methods to boost your income if you’ve already cut your budget as far as you can. With your present job, you may be able to negotiate a raise or take up additional shifts. You may also pay off your school debts by working part-time.
We have an entire series dedicated to side hustles for those who work in high-debt professions like occupational therapy, dentistry, and teaching.
You may select a smart side hustle that makes use of your current talents and qualifications, or one that gives you a creative outlet or a fresh learning opportunity. Consider starting a few modest side businesses that don’t take a lot of time or effort (e.g. dog walking or house sitting).
Then, over the following five years, put every additional money you make toward paying down your student loan total.
Other options for paying off your student debt sooner
Depending on your job, you may be qualified for a number of student loan repayment aid programs that may help you pay down a large portion of your student debt.
Some states, for example, have student debt forgiveness programs for teachers, attorneys, and healthcare professionals who work in underserved areas.
Check with your company to see if they have a student debt payback program for its workers. Employers are beginning to realize the benefits of these loan programs in terms of recruiting and retention.
Do you need assistance determining if it’s in your best interest to pay off your private or federal student loans sooner rather than later? Our team of student debt specialists can assess your specific circumstances and provide you a choice of student loan repayment options to help you improve your overall financial position.
Obtain a Student Loan Program
If you are a college graduate, you likely have student loans to pay off. So, how do you plan to do it? The “student loan debt problem” has ballooned in the past decade. In the U.S., the average student borrower owes about $28,000 in federal student loans. Yet, it is possible to pay off these loans in under five years. Student loan debt is essentially unsecured, meaning you don’t need to sell your house or other assets to pay off your student loans. You can instead sell stocks or other investments with equity value to pay off your student loan debt.. Read more about how to pay off student loans in 5 years calculator and let us know what you think.
Frequently Asked Questions
What is the best strategy for paying off student loans?
The best strategy for paying off student loans is to make a budget and stick to it. This will help you avoid unnecessary spending, which can be detrimental to your financial situation.
Is it possible to pay off student loans in 5 years?
It is possible to pay off your student loans in 5 years, but it will take a lot of hard work and dedication.
How can I pay off 100k student loans in 5 years?
You can try to pay off your student loans in 5 years by making an extra $1,000 a month.
This article broadly covered the following related topics:
- how to pay off student loans in 5 years
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