How Can You Reduce Your Rate And Rack Up Savings
There are plenty of ways for lenders to ding you if your repayment goes awry. The consequences start with late fees and potentially lead to a default, garnished wages or worse.
So when your repayment is going right, you should be rewarded for it.
Early payment discounts are hard to come by, and on-time payment discounts are also more difficult to find than in the past. Still, you can score significant savings through discounts for autopay, good grades, graduating and banking. Theyre just as valuable if they reduce your interest rate, even by only a fraction of a percentage point.
As you shop around, put the onus on lenders. Ask about what happens when your payment is late and what occurs when youre consistently on time. If youre unsatisfied with their answer, it might be time to move on to a competing lender.
If You Have Lots Of Credit Card Debt
No, paying off your student loans early is not a good idea.
If you have credit card debt, paying off your balance should be the priority before turning to your student loans. While student loans can have high interest rates, credit card interest rates can be staggering. The average credit card interest rate is 16.97%, as of September 2019.
With such high rates, youll probably save more money by paying off your credit card debt first than if you focused on your student loans. Take a look at how much youd pay interest on your credit card debt and student loans over the course of 10 years:
|Interest paid is based on $10,000 total for all loan types paid over a 5-year term. Federal student loan rates are accurate for the 2019-20 academic school year.
Keep in mind, though, that your credit card interest rate and loan APR are specific to you. So, do your own calculation to see what makes the most sense for your situation.
Itll Speed Up Your Loan Payoff Time Frame
In addition to reducing what youre handing over to the lender for interest, a lump sum payment would also get you closer to being debt-free faster. Going back to the previous example, making a $5,000 lump sum payment on a $30,000 debt could trim almost two years off your total repayment period, assuming you kept paying the same $320 a month. If youre able to add on a few extra dollars to your payment each month, you could shorten it even more.
For many millennials, student loan debt has become a major barrier to other financial goals, such as saving for retirement or buying a home. If youre able to get rid of your loans in less time, you can use the money youve been paying toward them each month to start building your nest egg or saving for a down payment.
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If You Dont Contribute To Your Retirement And Get The Max Employer Match
No, paying off your student loans early is not a good idea.
When you have student loans, future goals like retirement may not seem that important. But its important to invest now, while youre young. This gives your money time to grow so you can have a comfortable retirement.
Not all employers offer 401 matching, but many offer a match up to a certain amount or percentage. So at the minimum, its a good idea to contribute enough to employer-offered retirement plans to qualify for the full match before making extra payments on your debt.
Consider All Student Loan Opportunities
Of course, if you want to apply for more than one student loan at a time, youll need to consider more than one source, because many loans simply dont offer enough by themselves. Lets say, for instance, that you have a Perkins loan from the federal government. From this plan, youll get $5,500 a year to put towards tuition. According to data collected by the College Board, this would amount to a little over half your tuition at an in-state public school, generally the cheapest college option. While very helpful, you still may look to other places for additional aid.
Private loans could offer you more money, but, as stated earlier, your interest rates will most likely be higher . The next step will probably require you to figure out how much money youll need to offset your costs, and whether or not it makes financial sense for you to take out another loan. Like most things in life, theres a trade-off involved. Youll have more financial security for the moment, but in return, youll have to pay off the loan with interest upon graduation.
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Tax Breaks Can Turbocharge Your Debt Repayments
Recent graduates can take advantage of a number of tax breaks that can help them boost their debt repayments, Casey added. For example, you can claim the interest on government student loans as a non-refundable tax credit, which decreases the amount of tax you owe. If youre not making enough money to owe tax, you can carry the credit forward until you do for up to a maximum of five years. Recent graduates may also be able to take advantage of the tuition tax credit, which works in a similar way.
Casey said she used both credits to lower to offset her taxes in the first couple of years after finishing her BA.
I would get a $5,000 tax refund and put that toward my student debt, she said.
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Accessing Money From Your Student Line Of Credit
You should be able to access the available credit in your student line of credit soon after:
- youve signed all of the necessary documents
- your application is approved
You can usually access the available credit from your student line of credit at:
- a branch of your financial institution
- an ATM
- through online, mobile or telephone banking
Some lines of credit will also let you access the money by writing a cheque.
Financial institutions each have their own terms and conditions for the lines of credit that they offer. Speak with your financial institution for more information about the student borrowing options they offer.
Borrow only as much money as you need to cover your needs while studying. Think about whether youll be able to make at least the interest payments while youre studying. Also think about whether youll be able to repay the money that you borrow from a line of credit when you graduate.
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What Are Plus Loans
These are federal direct loans that are made to parents of dependent undergraduate students, as well as to graduate or professional students enrolled in school at least half time. PLUS loans don’t have a cap on the amount that can be borrowed, but you can’t borrow more than the cost of attendance at the specific school youor your child, if you’re the parentsare attending. This kind of loan does have drawbacks, so research them carefully.
Student Loan Interest Rates In Canada
Most student loans in Canada have a federal portion and a provincial portion, and each amount is subject to their own student loan interest rates . You have two interest rate options to choose from for your federal student loan interest rate:
- A fixed-rate of 2% plus prime
- A variable-rate equal to the prime rate
Fixed rates are exactly as they sound fixed and unchanging throughout your loan repayment period. A variable rate is lower but fluctuates depending on Canadas prime rate. Canadas prime rate is currently 2.45% and is likely to stay low for the near future, but your loans repayment period defaults at ten years and a lot can change in ten years.
Youll apply for both your federal and provincial student loans through your province of residence. Some provinces have their own interest rates and special funding, and some work directly with the federal government for a seamless experience. For example, OSAP interest rates are Prime + 1.0%, but British Columbias mimic the federal rates above. Heres a breakdown of the loans offered by the various regions and Canada student loan interest rates:
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How To Avoid Having Federal Student Loans Sent To Collections
The federal government will send student loans to collections after nine months of non-payment. If youve already missed a payment or youre worried about missing one in the future, here are some strategies to consider.
Change Your Repayment Plan
Borrowers with federal loans can switch to a less expensive repayment plan if theyre currently making payments under the standard repayment plan.
These options include income-driven repayment, in which payments will be determined based on your annual salary and family size. Depending on the type of loan you have, the remaining balance will be forgiven after either 20 or 25 years worth of payments. Borrowers will have to pay taxes on the amount forgiven.
You also can use an extended or graduated repayment plan if you want a lower monthly payment. These plans do not include any loan forgiveness, however. You can use the Federal Student Aid Loan Simulator to see how your payment may change.
Learn The Best Ways To Manage Education Debt
If you borrowed money to pay for school, your first question might be how best to pay off your student loans. The short answer is that there’s no magic bullet, but there are definitely things you can do to make paying back education debt easier. Student loan debt reached an all-time high of $1.61 trillion in 2021, so you’re not alone. A growing segment of the economy is devoted to helping Americans figure out how to pay off student debt, and there’s a lot to learn.
Start by reading this overview to understand the basics. Then learn about and consider various options, such as loan consolidation, loan deferment, or forbearance, and think about how you will work paying student loans into other financial goals, such as saving for a down payment on a home. There are even plans that allow for loan forgiveness, as you’ll see below. Now, review these nine tips to help you get a handle on your student loansand even pay them off faster.
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Why Has My Maintenance Loan Reduced
Maintenance looking a little light? Are you a final year student?
When you are in final year the amount of your maintenance loan will reduce. Strictly speaking this is because once you finish your final exams, you are not a student anymore. In your previous few years as a student, the government took into account summer vacation. However, this no longer applies once a student has completed their final term.
Federal Direct Plus Loans
Federal Direct PLUS loans are available to parents of dependent undergraduate students, as well as to graduate or professional students enrolled in school at least half time. PLUS loans do not have a cap on the amount that can be borrowed, but you can’t borrow more than the cost of attendance at the specific school youor your child, if you’re the parentsare attending. Cost of attendance is defined as tuition and fees, room and board, books, supplies and equipment, transportation, and miscellaneous expenses.
Unlike Federal Direct loans, PLUS loans do require a credit check but not a specific credit score. Borrowers cannot, however, have an adverse credit history unless someone agrees to be an endorser on the loan or they can prove extenuating circumstances for the adverse credit history. Apply for a Federal Direct Parent PLUS loan here and a Federal Direct Graduate PLUS loan here.
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Private Institutions And Other Student Loan Providers
If you dont qualify for government student loans or receive a loan large enough to cover all your post-secondary education costs, you may have to look at other options. If this is the case, here are some alternatives for you to consider:
- Student Line of Credit: Offered by most banks and credit unions, a student line of credit is similar to a regular line of credit, where you are approved for a maximum limit, but you only pay interest on the amounts you actually withdraw. Student lines of credit usually only require you to pay interest on the loan while you are in school, and some convert to installment loans once you graduate.
- Loan Connect
When Should I Apply For My Student Loan
Apply early! All students should apply for their government student at least 6-8 weeks before the first day of classes. Most provinces will have their annual loan application available on, or shortly, after May 1st for classes that start in the upcoming September. Remember, students must apply annually for loan funding!
Once you have submitted your online loan application, check on your loan status on your provincial student loan web site as most students will have to complete more steps prior to any money being released so read carefully to avoid funding delays!
If you need help with your student loan application or a student loan appeal, please contact the Financial Aid office by emailing:
Important Note: Full-time students do not have to be registered in classes when you apply for your student loans however, make sure that you register for and complete the course load that you have indicated on your loan application or your loan may be reassessed and possibly reduced and/or cancelled if you are taking less of a course load than you originally indicated.
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William D Ford Federal Direct Student Loan
In the Direct Loan program, the U.S. Department of Education is the lender for your student loan. There are two types of student loans in the Direct Loan program subsidized and unsubsidized. These loans are not based on your credit rating/score and do not require a credit check.
- The Direct Subsidized Loan is based on need. Interest on the Direct Subsidized Loan does not accrue while you are in school and during your grace period.
- The Direct Unsubsidized Loan is not based on need. Interest on the Direct Unsubsidized Loan does accrue once the loan is disbursed.
Loan Request Process: If you were not initially awarded a Federal Direct Student Loan and are interested in requesting one, or if you were only awarded a Subsidized loan and would like to request an Unsubsidized loan, you must complete and submit the online Federal Direct Loan Request Form.
|Students who will be offered aSubsidized loan automatically:
|Students who need to submita loan request form:
Private And Alternative Student Loans
Lenders or originators for private student loans include banks, credit unions, state loan agencies and other financial institutions and organizations. Private student loans may have a fixed or variable interest rate and frequently require a cosigner. As well, realize that as soon as you borrow or the loan is disbursed, interest immediately starts to accrue, and youll be expected to make payments.
Due to these factors, private student loans are only recommended after youve exhausted federal loans and other forms of financial aid. Consider the following points:
- Private student loans may be an important funding source for students who are ineligible for federal student loans or who need more funds than the federal programs can supply
- The University of Central Oklahoma requires all students applying for private or alternative loans to complete a FAFSA and be considered for federal funding first
- To apply for a private loan, view the borrower benefits and apply electronically and,
- Students should allow a minimum of three weeks from the time they request the loan on the lender’s website until UCO receives the loan proceeds.
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What Is Financial Aid
Most students dont have the ability to pay for college out of pocket. Considering tuition, books, room and board, and other related fees, the cost can be substantial. Not surprisingly, most students need to research financial aid options.
Financial aid consists of a variety of components that help students pay for college, such as scholarships, grants, loans, and work-study programs. Although some types of aid do not need to be paid back, others do.
It wasnt until I talked to Rebecca that I learned that financial aid does not always equate to free money.
Its absolutely possible to qualify for grants, which are essentially free money, Rebecca said, but most of the time, accepting financial aid means taking out federal loans.
I suddenly felt ripped off. No oneNO ONEever told me that financial aid meantstudent loans. Having been raised to live debt free myself, the idea that student debt may be masquerading under a friendlier title didnt sit well with me.
If financial aid is just a loan, I asked, how is it any better than getting a private loan to pay for college?