Student loan debt can seem overwhelming, whether you're a recent graduate, a not-so-recent graduate or the parent of a college student. Even if you have a solid budget and plan, it may feel like you're barely chipping away at the principal balance. There could be options you may not have heard of that can help you get rid of student loan debt more quickly.
Look into loan forgiveness
The Public Service Loan Forgiveness Program may qualify you to have your student loan balance forgiven entirely. This payment option is only available to those employed full-time by a local government agency, a tax-exempt, not-for-profit or one of a number of not-for-profit public service organizations like law enforcement or libraries. This program requires an application and acceptance, and is only available for Direct Loans. Forgiveness only happens after 120 separate, on-time monthly payments are made.
Make payments on the interest
If your loan payments have been deferred, or if you are in a grace period because you are still in school or recently graduated, go ahead and make monthly payments on the interest. Even if you aren’t making payments on your entire balance, interest continues to accrue and is added to your principal balance. That's called compounded interest —great for your savings, but not so great when it comes to your debt. Interest-only payments are more affordable, will keep your loans out of default and can help you pay less over the life of the loan.
Refinance your loans
For borrowers with excellent credit, there may be options to refinance your student loans at a lower interest rate. This can be especially helpful for private student loans or loans with very high interest rates. Be careful about refinancing a federal loan with a private loan, as federal loans come with protections and options (like the forgiveness program above) that are lost if the loan is refinanced with a private lender.
If you have equity in your home, consider a home equity line of credit (HELOC) to pay off your student loan debt. A HELOC may offer a lower rate than your student loan, thus helping you pay off your loan sooner.
The most important thing to do to pay off your student loans faster is to take action today. Don't wait — or worse — ignore your loans for so long they go into default. Even a small step that you take today can have a big impact tomorrow.
The Federal Student Aid website can help you learn more about your loan options. For additional help managing your student loan debt, contact your local branch for no-cost Financial Counseling.
The advice provided is for informational purposes only. Contact a financial advisor for additional guidance.
HELOCs are subject to approval, are available for properties located in NC, SC, GA or VA, and are not available for manufactured homes. Members must reside in NC or bordering states to be eligible.