There are several things to know about student loans. The number one rule is to know what exactly you are signing up for when you apply for a student loan and if you’ll be able to pay off the loan once you’ve entered the repayment process. Many individuals today are having this issue.
Let’s say your not having any of those issues. Let’s say you know that you can pay off your loan and at least make the minimum payments each month. Great. Now, how do you pay them off quickly? You need to know a few things first. What is your minimum monthly payment? What is your loan amount? When is the loan expected to be paid off? Student Loan companies will usually set up a 10 year to up to 25 year pay off schedule. You should know when your student loan provider is expecting you to finish. This is one way they will figure out your minimum monthly payment, along with your interest rate. You should also know about your interest rate. Is it fixed or variable? This is going to effect the total amount you will actually be paying.
You’ll also want to check what type of repayment plan you have. Standard Repayment Plan, Graduated Repayment Plan, Extended Repayment Plan, Income-Based Repayment Plan, Income-Contingent Repayment Plan, or Income-Sensitive Repayment Plan.* If you don’t know what these are, you most likely have the Standard Repayment option (check to make sure). If you have one of the other repayment plans, you’ll wind up paying more in the long run and there may not be an option to pay more. A good number of these other plans are based on your income. These options aren’t for all loans and private companies have less options.
The quickest way, now that you have all your information, is to look at the payoff balance and to pay that off. Not everyone can do that, but it is the quickest way. The next best way is to pay more towards your principle each month then what the minimum is. Before you pay extra, make sure there is no penalty for paying off early or paying more each month. Your bill should have this information on it. Sometimes it is on the back where the payment information is. Read everything carefully. If you can’t find this out, call up your student loan company and have them tell you. If there is no penalty, pay more towards your loans then the minimum. Depending on how much extra you pay, you may be able to pay off your balance sooner then the expected payoff date. You may also be able to lower your interest rate. Lowering your interest rate will bring down the total balance and may even lower your monthly minimums.
*Federal Student Aid – http://studentaid.ed.gov/repay-loans/understand/plans