Paying Off Student Loans
I have consolidated my student loans into one monthly payment. My loan period is very long and I was wondering if it would make any difference whatsoever if I made an extra payment here and there? Any other suggestions for paying it off early?
The Satisfaction of Paying Off Student Loans Early
I can attest that paying extra on student loans does make a difference. At one point, the payment on my student loan was more than we could comfortably handle. When we got a better handle on our bills, I began paying extra every month on the loan. The loan payment was something like $60 per month. I rounded it up and paid $100 per month toward the loan. At first, it didn't seem to make much of a difference. However, the longer we paid the extra $40 per month, the more we could see the balance begin to fall. You can't imagine how satisfying it is when you get to the point that almost all of what you pay goes to principal and not interest. The ultimate satisfaction is paying off the loan early. Even if you can add only $10 per month over and above the actual note, it will add up.
Paying Off Student Loans Pays in the End
I am in the last 30 days of paying off a $37,900 student loan. It has taken me a bit less than 12 years. If you can pay extra toward principal, it really does help. I took a second job for the last four years, so I could pay three payments every month and turbo-charge my payoff. In the beginning, I could only send an extra $5 to $10 every month, but even a little bit of extra toward the principal pays off at the end of the road.
Paying Off Student Loans Early Makes a Difference
It will make a huge difference. Depending on what interest rate you're paying and the amount of your outstanding loan, it could save you hundreds of dollars a year in interest by paying it down. While in grad school, I would watch the interest accrue on one of my two outstanding student loans (the other was interest deferred while I was in school) every week on the Fannie Mae website. It was dispiriting to realize the payments I had made prior to grad school were effectively wiped out by the interest that was accruing once I'd returned to university. I started throwing every spare dollar I could at that loan. I'd save up $200 or $500 and write another check to Fannie Mae. Money from second or third jobs, found money, gift money, etc. went towards the debt. By the time I got my Ph.D., I was completely debt free and had paid off both of my student loans. The feeling of freedom was incredible. If you can do it and you have no higher interest debt, I'd highly recommend it!
Be Cautious Paying Off Student Loans Early
Much has been revealed recently about the corruption in the student loan industry. Some universities were taking kickbacks from lenders for directing students to them (not to mention legislators that received funding in exchange for changing the laws to make it more difficult for borrowers to negotiate student loan debt).
This person needs to understand that student loans are the only type of debt that have had consumer projections removed from them. That means that if the person falls upon hard times and is unable to make the payments, they cannot be included in a bankruptcy and the borrower will not be allowed to consolidate the loans with other types of debt (such as credit card debt) in order to negotiate a more reasonable payment schedule or interest rate.
Which Debt First?
Of course, paying extra on your student loans will make a difference. However, the interest rate tends to be lower on student loan debt than other debt. If you have other debt with a higher interest rate, that is where I would focus my extra payments.
Sasha in NM
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