After 7 years of school and two degrees later, I had $43k worth of student loan debt. That was a terrifying and depressing number to say the least. Four or five months after I graduated, I got a letter in the mail with papers to sign, regarding how much I would be paying back each month and how long it would take to completely pay off my student loan. In the letter it told me it would take me 10 years to pay off my debt. Almost, as long as I have been in school. That too was quite a daunting number.

For 3 years automatic payments came out, and I cringed every time. It looked like barely any movement was being made on my loan amount. I did not want to do that for another 7 years, so I started to do some research. Continue reading to see what I found.

Frequency

When you are setting up your Student loan payments traditionally the option you are given is for monthly payments. Depending on your income, that may work best for you. However, you can also make bi-weekly payments or even weekly payments. The benefits of paying more frequently is that you will have less interest on your loan to pay over the span of your payment period. Also, you will be able to cut down the length of time it will take you to pay off your loan.

Lump Sums

Another way of helping to pay down your loan is to make lump sum payments. For example, if you have a huge tax refund, get a monetary gift, or make extra income from a second job or business, use that money to make extra payments whenever you can.

Best time to make extra payments

I started making extra payments on my loan and was quite proud of myself until I realized that not all of my money was going to the principal loan amount, some of the money was still going to interest. Even if it wasn’t a lot. So I did some more research..

There are two ways to make sure any additional payments you make to your loan actually go to your principal and not your interest.

1. Call or write a letter to you loan provider asking that any additional payments be applied to the principal of your loan.
2. Look at your loan statement and figure out on what day your interest charges are the lowest. Make your extra payment on that day as the full amount will go to your principal.

I first started making extra payments in January 2019. Since then I’ve paid off $6800 of extra payments on my principal. The interest rate also dropped in 2019, and that helped as well.

COVID-19

During this global pandemic, Ontario student loan payments have been stopped and Interest charges have been paused. If you haven’t already, and are able, this is a great time to make those lump sum payments I talked about. I’ve been fortunate to still have work during this period of time, so I’ve sent in my usual payments plus a little extra. Because there are no interest charges right now I’ve been able to put about $4k directly to my principal loan amounts in the span of 6 months. After 4 years and 9 months, my student loan is currently sitting at approx. $19k

Try and pay down your loan as quickly as possible, this will help you save on how much you pay to interest over time. So you can…

#LevelUpYourWealth

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