Tips To Paying Off Student Loans
At this point it seems like most of us will be making payments on some kind of student loan for the next few decades. So what, if anything, can you do to make the payment process faster or easier?
According to the Federal Reserve student loan debt rose by 107 percent just from 2009 to 2019. This means that more and more Americans are facing hefty long-term loans on top of everyday expenses and debt like housing and car payments. So what can be done about it?
First Understand Your Loans
Before you can see what options are out there you have to understand what kind of loans you have. There are generally two kinds of loans: federal and private loans.
Federal loans are granted by the US Department of Education and are obtained by completing a FAFSA application (a tedious application you are unlikely to forget). With federal loans you generally get a 6-month grace period after graduating before you have to begin payments and tend to have more options when it comes to making payments.
Private loans are issued by private institutions like banks and universities themselves. These vary wildly and don’t have any set of standardized rules.
Set Up AutoPay
If you have a stable stream of income consider setting your loan payments to auto-pay, especially if you have to make payments on a bunch of different loans. This will help you stay on-top of your payments without having to worry. Not everyone can swing this so don’t worry if you can’t!
Consolidate or Refinance
If you have a bunch of loans at a bunch of different interest rates and struggle to make many payments you might work better with debt consolidation. This simply groups your debt at one lender where you will make one single monthly payment that will take care of all the loans. This can also help save on interest if you have higher interest rates on some of your loans. Talk to a financial advisor if this is something that you think might be good for you.
If you have private loans you can opt to refinance if your credit is in good standing and you have a good score. This process would be using your existing good credit history to get a reduced interest rate and saving you hundreds or thousands of dollars over the rest of your loan.
Craft Your Payment Plan
First and foremost make the minimum payment every month. Defaulting a loan is not great for your credit score. But beyond that — make a plan.
If you can pay more than the minimum without it impacting your finances then do that! If you have multiple loans including some that are smaller try knocking those out faster to cut down on your monthly payments going into the future.
More importantly if you can make bigger payments towards the higher interest loans put your focus there so you don’t accrue thousands of dollars in interest over the years.
It’s all about establishing your ideal payment plan. As long as you meet your minimums you are good to go.