It can be difficult to pay off student loans after graduating.
Student loans may take several years to pay off. Most student loans start out with payment terms of about 10 years, although you can extend that length if you consolidate the loans and lower your monthly payment. If you owe a lot on student loans, it may seem difficult to finally pay them off, but it is possible to do it. Student loans are rarely discharged during bankruptcy, and the only way to not pay them is to become permanently disabled.
Benefits of Paying off Student Loans
When you pay off your student loans, you stop paying interest on the money. This sooner you pay off the loans, the less you will pay in interest over the life of the loan. Another benefit is that paying off the student loan frees up the money in your budget for you to invest and build wealth, or it can allow to do things you would like to enjoy but cannot currently afford to do. There is no penalty for paying off your student loans early.
Disadvantages of Paying off Student Loans
Student loan interest is tax deductible, which lowers the amount you will need to pay in taxes. By paying off the student loans you will have more money available to you, but this benefit as well as the lower interest rate on federal student loans may push your student loans to the back of the list when you are trying to get out of debt. Other than the tax deduction, there is no reason not to pay off your student loans.
Finding Extra Money to Pay Toward Student Loans
Create a budget to find extra money to put toward your student loans each month. A budget will let you track how much you spend and see areas you can cut back on to get out of debt. Make a goal of when you want to be out of debt and then determine how much extra money you need each month to make that happen. If you need to, you can take a second job or sell things to raise extra money. You can also apply bonuses and other extra money you receive toward the debt.
Qualifying for Loan Forgiveness
You may be eligible for a loan forgiveness program. Teachers can have a portion or their entire loan forgiven by working in a low-income school. Employees of state or federal governments may qualify for loan forgiveness after 10 years of service. There are also other service organizations that will help you repay or allow you to qualify for a portion of your student loan to be forgiven if you work for them for a set number of years.
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