The Student Loans Lie
Student loans will be an anchor around your ankle until you finally pay them off. Student loans can cause you a lot of stress and anxiety until theyre gone. You may feel pressured to take whatever job you can find straight out of university so that you can afford to keep up with the minimum payments on your student loan.
Refinance Student Loansif It Makes Sense
Before you go running into the arms of an all-too-eager lender, know that refinancing student loans is not the right move for everyone. If someone told you this is the absolute best way to pay off student loans, they were lying. But that doesnt mean you shouldnt at least look into refinancing.
When you refinance, youre taking all your loansfederal, private, often a mix of bothto a lender who pays them off for you. And now you owe this new lender the money they just fronted you.
With a refinance, the goal is to secure a better rate and better payment termswhich means you pay less each month and for a shorter amount of time to one lender instead of more money for a longer period of time to one or more lenders.
If youre in a position to keep paying the same amount you were paying before you refinanced, even better. Because that means youre throwing more at the principal each month than you were before and avoiding more interest. Plusand heres the best partif youve got other debt outside your newly refinanced student loan, you can ramp up your debt snowball even faster once you knock out that student loan.
Remember though, youre refinancing to get a better rate and payment terms. If thats not what youre being offered, dont refinance. Its a bad deal. Make sure to do your homework and read the fine print, or you could end up deeper in the hole than you were before.
Increase Your Income With A Side Hustle
If your biggest problem is income, pick up a part-time job on the nights or weekends so you can stack cash quickly. Then toss that extra cash directly at your student loan debt! There are a ton of side hustle options out thereeverything from driving an Uber and delivering food to walking dogs and house-sitting. When I was paying off my student loans, I drove for Lyft and Uber and did freelance marketing work to pay those bad boys off even faster.
And dont hit me with the I dont have time for another job excuse. If you have time to hang out with your friends, scroll Instagram, or watch Netflix, you have time to make a few extra bucks.
Remember, the extra job wont last forever. Youre just trying to get intense and kick that student loan debt out of your life so you can move on with your life.
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Lower Your Interest Rate Through Discounts
Most lenders will offer a 0.25 percent to 0.5 percent discount if you set up automatic payments on your loan.
In addition, private lenders may offer other interest rate discounts if you meet certain criteria, like making a certain number of on-time payments or taking out another loan with the same company. If you have private student loans, contact your lender and ask about any opportunities for interest rate reductions or discounts.
Takeaway: It may be possible to reduce the interest rate on your existing loans by setting up autopay or asking about loyalty discounts.
Next steps: Contact your lender to inquire about the various rate discount programs that may be available.
How Should You Pay Back Student Loans
Answer 1: NOT at once.
Answer 2: Bit by bit.
This is the reality of the situation: to pay off your student loan. It takes time, patience, and discipline. Paying back your student debt has to be a priority for you to make it happen. Contrary to the belief of some, student loans are debt. Whether you owe money to your credit card or the government for student debt, its still debt at the end of the day.
If you want to get serious about paying back your student debt, it helps to break it down by lender or financial institution. When you do that, you can figure out exactly how much you can afford to pay extra from your monthly budget towards your student debt.
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What Is Loan Consolidation
Consolidation means your lender has given you a “repayment date.” It starts on the first day of the seventh month after you stopped attending full-time studies or withdrew from classes.
The National Student Loans Service Centre will automatically send you a consolidation agreement, approximately 45 days before you enter repayment.
Your consolidation agreement shows:
- The details of your current outstanding Canada-B.C. integrated student loans balance.
- Your monthly payment and when it is due. Please note that your payments will be prorated to your Canada and BC student loan debt, based on each loans portfolio outstanding balance.
- How long you have to repay.
- The interest rate charged on your loan.
- The bank account from which payments will be withdrawn.
Your credit rating stays in good standing with Canada-British Columbia integrated student loans and/or other BC and Canada student loans when you meet the terms of the consolidation agreement and repayment schedule by making your monthly payments on time.
The consolidation agreement lets you:
- Review your loan information.
- Review your bank account information.
- Establish your loan repayment options including:
- Setting up the pre-authorized payment plan
- Choose the fixed-rate interest option
- Review repayment assistance plans
When She Realized She Had To Make A Change
Although she had a large loan balance with some high-interest debt, it wasnt until Becky sat down and reviewed her loan terms that she became motivated to accelerate her student loan repayment.
I did some math and said, I want to get this over with, she said. I wanted to rip the Band-Aid off and get rid of the bulk of the loans that were going to cost me the most money in the long run.
When she graduated from college, Becky had decided she planned on retiring early and pursuing financial freedom. But to do that, she realized she had to pay off her debt so she could focus on investing and growing her money.
And that was why I really decided it was the best time to start, because if I waited, the student loan interest was just going to accrue, she said. It would ultimately take me longer to pay off.
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Consider A Floating Interest Rate
When you graduate from school, you have two options for your student debt: you can go with a fixed or floating interest rate. Many of us go with fixed but dont dismiss floating outright. With the floating rate, you could save a lot of money, especially if interest rates keep falling . Consider all your options before deciding whether to lock in with your student loan interest rate.
Start Repaying 6 Months After Leaving School
After finishing school, there is a 6-month non-repayment period. No interest accrues on your loan during this time. When this period is over you have to start making payments on your Canada Student Loan. Temporary COVID-19 relief
Contact your province for information on interest charges to your provincial loan.
The 6-month non-repayment period starts after you:
- finish your final school term
- reduce from full-time to part-time studies
- leave school or take time off school
If you need to take leave from your studies, you might qualify for Medical or Parental Leave.
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Take Interest Rate Reductions
Effectiveness level: Low
While you can cut down on the cost of your student loans and get some big wins with the strategies above, smaller savings can add up, too. One of them is the interest deduction from signing up for automatic payments.
Many servicers offer a 0.25% interest rate deduction on federal student loans for enrolling in automatic payments. While this isnt a ton of money, its not bad to get a few bucks back.
Besides the interest savings, automatic payments can be a good idea to make life easier. By setting up automatic payments, you dont have to worry about late or missed payments when paying back student loans . Plus, you can use automatic payments in conjunction with other strategies on this list, like making payments higher than the minimum.
Paying Down Student Debt Strategically Begins By Knowing Details About Each Loan
The first step to building a strategy to paying down student loan debt is knowing how much you owe across all your different loans. If youre unsure of how many loans you have, go to the National Student Loan Data System for info on your federal student loans. To track your private student loans, check your credit reports to ensure you know each of your lenders. Remember, student loans are reported on credit reports so ensure you pay all loan bills on time to avoid hurting your credit scores. As you collect info about each of your student loans, make a list to track:
- Type of Loan
- Fixed-Rate or Variable-Rate
- Total Due
- Grace Period
Knowing these details can help you figure out what loans are costing you the most and how to approach which loan you want to focus on paying off first. The Office of the U.S. Department of Education provides some helpful calculators to help you understand your loan terms and repayment estimation.
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Make Extra Payments Whenever You Can
In addition to paying more on your monthly bill, think about making extra payments. This can be particularly easy if you find yourself with extra cash.
- Grandma sent you a check for your birthday? Put it toward your loans.
- Got a one-time bonus at work for a job well done? Put it toward your loans.
- Tax refund? Put it toward your loans.
Spending that money on your loans now will pay off down the road when youve paid less in interest and therefore have more money to spend how you wish.
How To Pay Off $100000+ In Student Loans
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Six-figure student debt isnt the norm. So when youre facing a student loan balance of $100,000 or more, the standard, 10-year federal repayment plan may not be right for you.
Standard monthly payments will likely exceed $1,000 with that much debt. But you could save money in interest, decrease monthly payments or do both even pay off your student debt faster with a different repayment approach.
The best strategy is usually the one that costs the least overall, provided you can afford the monthly payments. Here are options for paying off $100,000+ in student loans, and how to decide which is right for you.
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Federal Student Loan Protections
In 2020, all federal student loan payments went into a forbearance period as a result of the Covid-19 pandemic. This forbearance period was recently extended through Jan. 31, 2022. This means that federal student loan borrowers are not required to make student loan payments at this time, and their balances will not accrue interest until after the pause ends next year. If you have private student loans, or you refinanced your federal student loans, however, you don’t qualify for this protection.
If you take out a personal loan with the intention of using the money to pay off your federal student loan balance, you will lose all the protections that come with federal loans. That means youwon’t be able to qualify for any federal loan repayment programs, like an income-driven repayment plan, grace periods for repayment and public service loan forgiveness , and you’ll lose access to the current forbearance period as well.
These initiatives are designed to make it easier to repay your balance as a federal student loan borrower, but they’ll no longer be available to you once you take on a private personal loan to pay off the balance. This can present a financially strenuous situation if you really end up needing some economic relief from making payments.
How Do I Make Payments
Once bills are due again, only if they are due youll be responsible for sending your monthly payments to the companies that hold your loans.
If you dont know where to send a payment, check with your schools financial aid office. The financial aid office will be able to tell you who your loan servicers are. You can then contact your loan servicers directly with specific questions.
You also can retrieve loan information via the National Student Loan Data System. Now more than ever, its vital you know your balance details.
Be aware that your payments are due even if you dont receive the bills. If you move after graduation, or you have relocated during the CARES Act pause, tell your loan servicer your new address to ensure you receive bills and can stay on top of your payments when if they resume.
Consider changing your loan due date to make budgeting easier. The monthly payment might be due before you receive your paycheck. Contact your loan servicer to see if your payment date can be switched to a more convenient day.
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Reach Out To Your Loan Servicer
You may have options to lower your monthly payment. Many companies say that they have alternate payment programs for borrowers who might not be able to make a full payment. These plans may include:
- graduated repaymenta plan where your payments start out lower and gradually increase over time.
- extended repaymenta plan where you pay less each month but extend the life of your loan over a longer period of time.
Asking for help when you run into trouble can keep you from falling further behind. Contact your student loan servicer and ask what options are available to you. Your student loan servicer is the company that sends you a bill each month.
Student Loans In The United States
Student loans are a form of financial aid used to help students access higher education. Student loan debt in the United States has grown rapidly since 2006. The total debt was $1.73 trillion by July 2021, with almost half of that being graduate school loans the average Bachelor’s degree borrower has about $30,000 of debt upon graduation.:1
With a number of notable exceptions, student loans must be repaid, in contrast to other forms of financial aid such as scholarships, which never have to be repaid, and grants, which rarely have to be repaid. For example, student loans may be discharged through bankruptcy, by proving “undue hardship” but the bar for discharge is high.
Research indicates the increased usage of student loans has been a significant factor in college cost increases.
US leaders have acknowledged the rise in student loan debt as a crisis. Former Secretary of Education Betsy DeVos said that Federal Student Aid’s portfolio “is nearly 10 percent of our nation’s debt.”
Student loan debt is unevenly distributed, and race and social class are significant factors in the distribution of student loans. Approximately 30 percent of all college students do not incur debt. The schools with the highest amount of student loan debt are University of Phoenix, Walden University, , Capella University, and Strayer University. Except for Nova Southeastern, they are all for-profit universities.
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Refinance Your Student Loans
If you have good credit, refinancing your student loans to secure a lower interest rate could save you money throughout the life of your loan and help you pay off debt faster.
Just keep in mind that refinancing federal student loans with a private lender means you’ll no longer qualify for federal loan benefits like forbearance, PSLF or income-driven repayment. If you think you might need to use federal loan benefit options in the future, it may be a good idea to stick with your federal loans instead of refinancing.
Use Loan Forgiveness Programs
If you work in a qualifying public service job, you can get your debt forgiven after you make 120 on-time payments. This strategy does require you to pay for about a decade. But, after about 10 years, you can have your remaining balance, which allows you to become debt free much faster. Public Service Loan Forgiveness has strict criteria, so know the rules if you want the government to forgive part of your debt.
There are also other student loan forgiveness programs that you may be eligible for just be sure to read the fine print before pursuing one of these options.
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Live Modestly In College And University
It may not seem like theres any urgency in paying back your student loan, but sooner rather than later, youll graduate and have to start paying interest. Although you may get a six-month grace period before youll have to start paying back your loan, youll be accruing interest over this period. Thats why it helps to watch your spending while youre still in school.
From credit cards to nights at the club, theres a lot of temptation to spend. You can fight the urge to spend by creating a budget and sticking to it. Not only will it help keep your spending in check as a student, but it will also prepare you for the real world when youre adulting.