How to Pay Off Student Loans Early

If you have recently graduated from college or professional school, your debts may look like a dark cloud over your future. You could have government loans or private student loans. You could have put tuition and books on credit cards and borrowed to buy a car. Now that you have finished school, you probably want more of the luxuries of adult life -- a new home or condo and nice vacations. But as long as you have huge debts, many of these will remain out of reach. Don't despair. You can find a way to pay off your student loans early.

Instructions

1

Make a list of all the debts you owe, as Ric Edelman, author of "The Truth About Money," recommends. Write the lender, the amount, the interest rate, and the minimum payment. Total up the debts and the minimum payments. To get out of debt faster, you will need to pay more than the minimum on one debt at a time.

2

Budget for a surplus to retire your debts. Don't upgrade your lifestyle too much even if you have a full-time job. Remember, you have only your net income, not the gross, for both living expenses and debt repayment. Earmark at least several hundred dollars a month for debt repayment, depending on the size of your debt. If you are married, work with your spouse to create a plan that allows you to pay more than the total minimum every month.

3

Pay cash for your purchases. Don't run up more debts, or you will only be digging yourself in deeper. In "Making the Most of Your Money Now", Jane Bryant Quinn writes that this rule is crucial to debt reduction.

4

Transfer loans to save on interest. According to Quinn, if you can transfer credit card balances to a new card with a lower rate, you should. Find new cards with low rates, or call the banks and ask for better rates.

5

Consolidate your government loans for convenience and interest-rate protection. Quinn suggests that if you consolidate, you choose the fastest repayment plan in order to force yourself to repay quickly. You won't incur a penalty for paying still faster, she says. According to Federal Direct Consolidation Loans, you can also convert variable interest rate loans to fixed-rate loans, protecting yourself from possible interest rate increases.

6

Put your extra money towards your highest rate debt until it is paid off, as Jane Bryant Quinn recommends. Your highest rate debt is probably credit card debt. Continue making the minimum payments on your other debt.

7

Work off your government loans. If you join AmeriCorps or Teach for America, you can receive money to help pay off your loans, according to Kiplinger's article "How to Pay Off Student Loans." You can also have your debt forgiven by teaching in a low-income area, according to Kiplinger's.

8




Have the freedom to pursue your dreams.

Put your extra money on the highest rate loan remaining once your credit cards are paid off. If you get pay increases, bonuses or overtime, put that money toward debt payoff. Just make sure no prepayment penalty exists for any loans you pay early. Continue until you have paid off all your loans. Then you will have the financial freedom to pursue your other dreams.