How to Pay Down Your Student Loan Debt Faster

There is no doubt that education is one of the best investments you can make – at any stage of life! However, with college fees on the rise, an increasing number of graduates also find themselves facing significant student loan debt.

While student loans are empowering tools that can propel you through your education journey, they can also scar your finances and hinder your chances of achieving your financial goals. That is why understanding how to manage and pay down your debt is more important than ever. 

Get started with the simple strategies below.

First Things First: Take a Hard Look at Your Finances – And Make a Plan!

According to recent estimations, today’s graduates enter the job market with a whopping average student debt of $31,100, which will require them to make average monthly payments of $307.54 (assuming a 3.5% APR) to pay their loan back in 10 years. 

This outlook might seem like a scary and overwhelming one – especially if you don’t have a solid repayment strategy in place. That is why the first steps to pay down your student loan debt include taking a hard look at your finances and making a plan. 

Some of the considerations to make when designing your plan include your current salary, expected salary increases, career advancements, fluctuations in household expenses, unexpected expenditures, and your own financial goals. 

Check if You Are Eligible for Student Loan Forgiveness

In the past months, Biden’s administration has passed the new student loan relief plan, which aims to cancel $10,000 in student debt for borrowers earning less than $125,000 a year. 

While this isn’t the only government-sponsored student loan repayment assistance program, you should not think twice about checking whether you qualify for student loan forgiveness under the new plan!

Find Ways To Increase Your Income

Although finding ways to pay down your student loan debt should be among your top priorities, focusing on increasing your income might be just as important! 

According to 2022 statistics, graduates with an average salary of $56,918 and a standard student loan debt will have a debt-to-income ratio of 54.6%. This percentage is nearly double the highest ratio a borrower can have (usually 28%) when applying for a mortgage!

While paying down your debt can improve your finances over time, supplementing your salary can help you immediately boost your income and reduce your DTI ratio, thus giving you access to better financial products. 

Some ways to increase your income include dedicating time to side hustles, creating digital products, striving towards a promotion, or upskilling to tap into a more lucrative niche within your industry. 

Look Into Refinancing Your Student Loan

Another valid alternative to lower your DTI ratio and reduce your debt is refinancing your student loan. 

As interest rates have begun to rise again following the all-time lows recorded during the pandemic, this might be the best time to refinance your loan. 

This option allows you to take advantage of today’s low-interest rates, reduce your monthly payments to lower your DTI or access better loan terms if your credit score or finances have improved since graduating. 

Test Different Budgeting Strategies

Unfortunately, paying down your student loan debt isn’t something that you can do overnight. That is why it is important to have a clear budgeting strategy in place on which you can rely for years to come. 

While there are several budgeting apps and tools out there that you can use, you might also consider the benefits of simplifying your finances through strategies such as the 50/30/20 rule. Although this method only often has rough guidelines to manage your after-tax income, it can be more sustainable in the long term compared to more time-consuming alternatives!

Check if Your Employer Offers Student Loan Repayment Assistance Programs

If your efforts have come to fruition, you might have found the best employer for your needs shortly after graduating. And, if you are now successfully employed, you might be able to tap into more resources than you’d expect!

Today, an increasing number of employers are providing employees with assistance in repaying their student loans by matching their contributions with a supplemental $5,250 a year. 

Make sure to look into this and other perks your employer might be already offering and avoid leaving precious resources on the table!