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Get Rid Of Student Loan Debt – Taking out student loans may be the only way you can pay for college. But that doesn’t mean you have to pay off your debt for the next 20 years.
Putting extra money toward paying off your student loans can save you thousands of dollars in interest and help you get out of debt faster!
Get Rid Of Student Loan Debt
This article explains 6 creative ways to pay off student loans, ways to earn extra income, and how people with low incomes can reduce their student loans.
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In a perfect world, you could simply pay for college through scholarships or grants — meaning you’d pay nothing after graduation.
Unfortunately, t people don’t live in a perfect world, so they have to create a funding mix combining loans, grants and scholarships.
It takes the average borrower 20 years to pay off their student loan debt! Additionally, a typical US student loan is $26,000 during that time.
Translation: if you can pay off your student loans early, it could save you thousands of dollars.
Ways To Get Rid Of Your Student Loans
For reference, the debt-to-income ratio is the portion of your gross income that you can use to pay off your debt each month.
This ratio is very important because lenders use it to decide whether or not they want to lend to you.
For example, if you need to get a loan for a new car, the lender will want to look at your debt-to-income ratio to make sure you can afford the monthly payments on that car.
Assuming you can pay off your student loans early, you’ll also benefit from the fact that there are no penalties for paying off your student loans early.
Creative Ways To Pay Off Student Loans
Some lenders include penalty clauses in loan agreements for early repayment of your loan. But you can’t get it with a federal loan, so paying off your loan balance early can save you money.
In general, paying off your student loans sooner is a good thing. That being said, there are a few small drawbacks that you should think about before clearing the credit balance.
You are allowed to deduct up to $2,500 of interest on your tax return each year. Once you pay off your loan, you don’t pay interest, so you can’t claim interest payments on your tax return.
Another thing to keep in mind when paying off your student loans quickly is that you have to make sacrifices elsewhere.
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For example, you may need to empty your savings account to pay off your loan. This means that you will not have an emergency fund in case of any big and unexpected expenses.
The solution to this could be to make sure you have a reasonable amount of money saved up and set it aside before you start paying off your student loans early.
Finally, paying off your student loans early prevents you from saving for retirement early. In your 20s, this may not seem like much, but it’s something you need to consider.
Let’s face it: college graduates don’t start earning six figures the day after they leave their dorms.
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In general, many students enter the world of work with relatively little income – and when you don’t have a lot of disposable income, it can make paying off student loans a little more difficult.
If you can’t afford to pay off your loans on your current salary, one option is to refinance your student loans.
Generally, you can transfer your debt to a new account. This transfer can be with the same bank to another type of loan or to another bank.
Either way, the end result of student loan refinancing is that you can secure a lower interest rate or easier payment terms. This allows you to pay off your loans without having to invest extra cash.
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If you’re taking out federal student loans and can’t make your monthly payments, there are several government programs designed to help.
As with loan refinancing, the first step in applying for an income-based repayment plan is to contact your loan servicer as soon as possible. Depending on your individual circumstances, you may be offered one of 4 income-based payment plans:
The IBR plan is a federal student loan repayment method that calculates your loan payments by calculating 10% of your discretionary income.
The ICR plan is similar to the IBR plan. But ICR plans calculate your discretionary income using the adjusted gross income (AGI) on your federal income tax return. After that, you are usually required to pay 20% of your discretionary income.
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PAYE also takes into account your AGI. But instead of 20%, PAYE plans usually ask you to pay off loans using 10% of your disposable income.
REPAYE loans work in much the same way as PAYE plans. The only major difference is that the repayment period is usually longer.
Another solution to pay off your loans with less income is to switch from a monthly payment plan to a bi-weekly plan.
By paying smaller amounts more often, you can keep your repayment schedule in check, but it also makes life easier for you when it comes to budgeting for the rest of your life. income.
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Some companies offer student loan repayment programs as an employee benefit. These schemes help you pay off your loan faster.
The IRS allows you to deduct up to $2,500 in interest paid on a higher education loan. This means that paying off your student loans will save you some money on your IRS tax return, so you’d be foolish not to claim it.
One of the most important things you can do when trying to repay a low-income loan is to stick to a budget.
Always try to cut back on unnecessary expenses like eating out or going out for coffee. Think carefully about what you can actually afford and weigh all your debt obligations and necessary expenses against your monthly income.
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If you have taken out federal student loans, you may be eligible for one of several student loan forgiveness programs.
For example, Civil Service Loan Forgiveness is available to those who work for government or nonprofit organizations after making 120 qualifying payments.
There is also a Teacher Loan Forgiveness Program for teachers who have taught at a low-income school for 5 consecutive years.
If you decide to enter the military, there are a number of generous loan forgiveness schemes that you may be eligible for.
How To Get Rid Of Your Student Loan Debt
The Navy’s loan repayment program offers up to $65,000 in loan forgiveness if you serve at least 3 years during your first enlistment.
If you work as an active health care professional, you can get $40,000 a year for up to 3 years to pay off your student loan debt.
You also don’t have to pay bills while you’re on the job, so more of your paycheck can go toward paying down debt.
For example, Kansas has 77 counties designated as “rural opportunity zones.” If you move to one of those areas, the state will forgive $3,000 in student loans annually for 5 years. This means that in just 5 years, you could reduce your student loan debt by $15,000 and save thousands in interest.
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If you really can’t pay your loan payments and have no other options, you can file bankruptcy and try to discharge your student loans.
Discharging student loans through bankruptcy requires fewer legal steps than discharging other debts. And sometimes even with bankruptcy you can’t get your student loans, it should be your last resort.
You should keep in mind that declaring bankruptcy can have long-lasting effects on other financial opportunities in your life, and it can prevent you from borrowing in the future.
We’ve looked at some of the more common ways to pay off student loans on a low income. But there are some creative alternatives worth exploring. To inspire you, we’ll take a look at a few options for you.
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It might seem crazy at first, but we’ll persevere. Increasing your monthly payments means you’ll pay less interest. This means you pay less in the long run.
Loan servicers may apply your extra amount to the next month’s bill by default. Ask them to apply the overpayment to your current balance and keep the next month’s payment as scheduled.
A part-time job like bartending allows you to earn decent money with tips after you finish your day job.
You can sell clothes, rent out your spare room or parking space, or use your skills to work as a freelancer. You can then put all your extra money towards your loan.
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