Paying off law school loans
After my last somewhat depressing post about the reality of law school and undergraduate debt, I decided to share some of the methods I use. Some of these techniques can be applied to any debt—credit cards, for example—and others can also be used to “pump up” your savings.
Put it on autopilot
Many student loan lenders offer a small discount for setting up auto-payments or for having a good payment history. For example: signing up for automatic payments with Sallie Mae qualifies borrowers for a 0.25% interest rate deduction on certain federal loans. Wells Fargo and Direct Loans offers similar discounts. Some lenders will automatically decrease your monthly payment along with your rate; be sure to make up the difference, or your repayment period will remain the same.
Plan your attack
You should know exactly how much you owe each lender, as well as the interest rate applicable to each loan. Take that information and plug it into an accelerated payoff calculator. The calculator allows you to determine how extra monthly or lump sum payments towards your highest rate debt will impact your debt, and even tells you how much sooner you will be debt-free.
Making a small extra payment each month will substantially decrease the total amount of interest you pay, and get you out of debt sooner. Using windfalls to make lump sum payments also helps: I used settlement funds from a car accident to pay off one loan, and then redirected that monthly payment to a different loan.
Find money in unexpected places
Throwing a few extra dollars at your loans each month pays off. Finding that extra money can be difficult. Sites like Upromise and eBates can offer rebate checks or even direct transfers to student loan payments. Redeeming credit card rewards for cashback and making extra payments also expedites repayment.
“When eating an elephant, take one bite at a time.” Pick the loan with the highest interest rate and put those extra dollars towards it. An extra $5 or $10 will ultimately save you money.
Steady as she goes or EXTREME?
There are many, many savings websites out there. As I am not a financial advisor, I have not touched on issues like saving for retirement, making sure you have an emergency fund, or getting the right insurance policies. If the thought of slow and steady progress makes you crazy, go check out Mr. Money Mustache or consider the idea of a Spending Fast.