Yahoo Finance 7 Ways To Pay Off $50,000 in Student Loan Debt in Less Than 5 Years
More than 43 million Americans are carrying some sort of federal student loan debt, according to BestColleges. That debt totals to trillions of dollars — $1.727 trillion, to be exact, per the Education Data Initiative. The average federal student loan debt balance is $37,088, while the total average balance (including private loan debt) could be around $39,981.
Right now, the average undergraduate is borrowing $32,637 to get a bachelor’s degree at a public university. If you go to school for longer or go to a school that’s more expensive than average, you’re looking at much more than that figure.
Find Out: How To Eliminate $100,000 of Debt
Learn More: $10K or More in Debt? See If You Could Become Debt-Free (for Less Than You Owe)
Getting saddled with thousands of dollars in student loan debt is stressful. But financial experts assure borrowers that there are ways to overcome that debt. Here’s a look at some of their methods to tackle $50,000 worth of student loan debt in five years’ time.
Pay Off the Loan With the Highest Interest First
As a rule of thumb, you’ll want to prioritize your loans by tackling the one with the highest interest rate first.
“That’s called the ‘debt avalanche’ method,” said Steven Kibbel, CFP, a financial advisor at Prop Firm App. “You make the minimum payment on all your other loans. But for the one with the highest rate, you pay as much extra as possible until it’s gone. Then you move to the loan with the next highest rate, and so on. Doing this saves you a bunch of money in interest costs.”
Read Next: You Can Get These 3 Debts Canceled Forever
Check To See If Your Loan Has Been Forgiven
During the past four years, $146 billion in student loan debt has been forgiven for 4 million Americans, per the White House. It’s important to check to see if perhaps your loan has been included in these forgiveness plans or could be in the future.
Tom O’Hare, a holistic education advisor at Get College Going, said in the meantime, you can prioritize your high-interest private loans and keep checking updates on your federal loans.
“The general recommendation is to pay down private loans first, with the highest interest rate and fewer benefits protecting the borrower, and remain vigilant watching what the administration and Congress will do with federal student loans. Benefits such as loan forgiveness, PSLF and the SAVE Program can be helpful to the right individuals and the debt,” he said.
Temporarily Pause Retirement Savings
If you have a large amount of student loan debt, one way to pay it off is to funnel what would be retirement savings into your debt payments.
“While you may be missing out on a company match, accelerating your student debt repayment may actually be better than a 401(k) in the long term if your interest rate is high, as your student loan interest is effectively your return on investment for paying down the debt,” said Eric Presogna, CPA, CFP, the founder and CEO of One-Up Financial. “Additionally, you’ll be debt-free earlier in life and able to take that additional monthly cash flow and accelerate your savings, getting you back on track for retirement.”
Pick Up a Side Hustle
If you’re not able to make significant payments with your current job, Presogna recommended getting a second job whose income you can dedicate to your student debt. “It’s easier now than ever to find creative ways to earn additional income for debt repayment, whether that’s driving Uber, picking up odd jobs on freelance sites like Fiverr and Upwork, or starting your own side business offering products or services in your respective field,” he said.
For example, the average salary for an Uber driver nationwide is about $19 an hour, according to ZipRecruiter. If you drive 20 hours a week, that’s an extra $380 a week you can make, equaling almost $20,000 a year. If you keep up at that rate, you could pay off your $50,000 in student debt in less than five years.
Look Into Refinancing
“Private refinancing combines multiple loans into one account amortized for five years,” O’Hare said.
Refinancing can potentially save you a lot on interest. “When you first got the loans, you probably didn’t have much income or credit yet. However, if your job situation and credit score have improved, you may qualify for better rates from a private lender. Refinancing can cut years off your payments,” Kibbel said.
O’Hare cautioned that with this method, the payment may double. This can be good news, as it can speed up your debt payoff. But if you don’t have the cash on hand to make the payments, O’Hare said there’s still another way to make payments.
“Another option would be to extend the timeline to lower the payment and use an added principal loan payment, thus shortening the overall term and interest paid — a move that could meet the 2029 timeline,” he said.
Ask Your Employer for Help
Some employers offer an education benefit. O’Hare said it’s worth asking whether this benefit can be used to pay off student debt.
“Seek assistance from an employer to shift traditional education benefits from obtaining a degree or credentials to supporting loan repayment needs. This can be highly beneficial, as the $5,250 can be a tax-free incentive for both the employer and the employee,” he explained.
The $5,250 figure O’Hare is referring to is the limit of tax-free assistance an employer can offer for education per employee per year. Though it’s not $50,000, it can certainly help pay off your debt and potentially make your monthly payment lower.
O’Hare also recommended asking for a raise or a bonus based on the quality of your work.
“Alternatively, if, as part of an employee’s annual compensation review, an employer was concerned about losing valuable talent but could not offer a payroll increase, a one-time lump sum payment would be excellent,” he said.
Split Up Your Payments
Kibbel recommended a simple method that actually boosts how much you pay but won’t be too hard on your bank account.
“Here’s a simple trick: Make half of your monthly payment every two weeks instead. So if your payment is $200 per month, pay $100 every two weeks. This equals one extra payment per year without any extra money out of your pocket! That extra payment adds up over time,” he said.
More From GOBankingRates
This article originally appeared on GOBankingRates.com: 7 Ways To Pay Off $50,000 in Student Loan Debt in Less Than 5 Years
