Source:­Money/2016/0708/Five­reasons­to­take­the­fast­tra ck­when­paying­off­student­loans

Unexpected money­saving tip could save you thousands of dollars on repaying student loans

Many people know the basics of saving money while repaying back their student loans: rides hare, cook dinner at home, and cut unneeded spending. Creating a monthly budget and abiding to all these principals is great, but there is another way to save a significant amount of money. Save big by paying off your student loan bill as fast as you can. By pitching in extra money in those monthly payments, you save yourself the headache of building up a lot of interest in the long run.

The average interest rate on federal student loans is 6% and it is even higher for private loans. Although 6% may not seem like a large amount of money, every year the interest builds up making it increasingly difficult to pay off student loan debt. The average amount of time that it takes for modern graduates with $20,000 to $40,000 of student debt to repay their student loan debt is 20 years. An increasing amount of borrowers are opting out for plans that offer income­ based repayment plans for student loans.

There is a wide variety of income­ based repayment plans that offer the lowest possible amount of a monthly payment. They are typically capped at 10% of the borrower’s discretionary income, making it possible for borrowers to take back their financial independence without compromising their standard of living. While it is safe to take the minimum required monthly payment, paying extra money a month will cut interest rates significantly. Even if the borrower can only throw in an extra $100 a month, after a year they have already paid $1,200 in addition to their monthly payments.

While it may be tempting to just pay the minimum monthly payment, there are many strong financial advantages to paying off student debt at a fast pace. Slashing unnecessary expenses such as monthly subscriptions, gym memberships, or nights out allows for extra money to be spent toward paying off student loan debt. By getting a jump start on paying off student loan debt, graduates have more time to save money for things such as retirement, a home, or even a vacation. Being debt­ free gives you back your financial independence to use your money the way that you want to. Paying more now may be just what you need to save more later.