Refinance Your Student Loans
Best for: Borrowers with high-interest loans and a good credit score
Refinancing student loans means a new lender pays off your original loans and issues you a single new loan. Ideally, youll get a better interest rate and more favorable repayment terms, saving you money over the life of your loan.
The rates and terms you qualify for depend on your income and credit score. You can refinance both federal and private student loans into a new, private loan. But if you refinance a federal student loan into a private one, you lose access to valuable protections, such as student loan forgiveness programs and income-based repayment plans.
Heres an example of how a lower interest rate can save you money:
- Monthly payment: $1,537
- Remaining term: 10 years
With the refinanced loan, youll save $189 a month and $22,680 over the life of your loan. You can also lower your monthly payment by refinancing to a longer repayment term, though youll pay more in overall interest this way.
Smart Debt Repayment Strategies
Now that you have all of your loan information together, the next step is to decide what to pay off first.
If you only make the minimum payments on each loan or card every month, this would be your debt payoff schedule:
- Auto loan: Paid in five years with $4,332 in interest.
- Paid in 6.4 years with $1,737 in interest.
- Student loan: Paid in 10 years with $4,092 in interest.
- Mortgage: Paid in 30 years with $164,813 in interest.
Overall, itd take you 30 years to become entirely debt-free, and youd pay $174,974 in interest. But if you want to pay it all off sooner and with less interest, there are a few approaches you can take.
Common strategies include focusing first on the highest interest rate, the lowest balance, or the somewhere in between.
Does It Matter Which Loans I Pay Off First
The debt payoff process can be tricky. If you still cant decide which loan to pay off first, any plan is better than no plan. At the very least, you should categorize your debt according to the characteristics mentioned above.
If you have a mix of good and bad debt, consider targeting bad debt first. This means high interest debt with loose repayment structures or unfavorable terms. That way, you can maximize interest savings and can continue receiving the ancillary benefits of good debt.
Ready to refinance your car loan?
Read Also: What Is The Fha Loan Limit In Texas
If Youre Having Trouble Repaying
If you need help with repaying your Canada Student Loan, you may qualify for the Repayment Assistance Plan .
If youre having trouble repaying a provincial student loan, contact your student aid office. For repayment assistance with a loan or line of credit provided by your financial institution, contact your branch to determine what your options are.
Understand that by making your payments smaller, it will take you longer to pay back your loan. Youll end up paying more interest on your loan.
If you consider refinancing or consolidating your student loan, note that there are important disadvantages.
If you transfer your federal or provincial student loan to a private lender, you will lose any tax deductions on your student loan interest. You wont qualify for the interest free period while you’re in school and will end up paying more interest over time.
What Happens With Borrowers Who Will Have A New Loan Servicer
Some 16 million borrowers could have a new federal loan servicer when repayments kick back in. That’s because some companies, such as Navient, have ended contracts to service federal student loans. For those who are dealing with a new servicer, they should receive communications from both their former servicer and the new servicer about the changes and how to set up online accounts.
Experts encourage borrowers with a new servicer to carefully document all their loan information from their account with their old servicer and compare it with what is in the new servicer’s system. While information should be seamlessly transferred to the new servicer, like with any moves, there is always a chance of error so having records of loan amounts, payment details and interest rates are good to have available and cross-checked just in case.
Recommended Reading: Rv Loan Rates Usaa
Pay Off Small Loans First
Some borrowers like watching their loans disappear, which encourages them to continue focusing on debt payoff. If that sounds like you, use the debt snowball method. Youll pay off the smallest student loan first, rather than the one with the highest interest rate.
You can also opt for a combination method. Rank your loans by interest rate, and if several have the same or similar rates, pay off the smallest one first. Youll still get some savings from choosing the debt avalanche strategy, but youll enjoy early, quick wins, too.
As you pay off each loan, roll over your payment to the next highest interest rate or the next smallest balance.
Pay More Than The Minimum Payment
Youve probably heard this one before. If youre only paying the minimum payment each month, youre not getting anywhere fast. You might not even be breaking even with the interest youre piling up! By making larger payments, youll be able to attack the amount you owe at a quicker rate. Start playing around with that Student Loan Payoff Calculator to figure out how fast you can pay off your loans by making extra payments.
Heres an example:
- Lets say you have the typical amount of student loan debt that the average student graduates with, which is $38,792.1
- With a 5.8% interest rate and a 10-year loan term , youd be looking at a minimum monthly payment of $426.78.2
- Because of interest, your total repayment amount would be $51,489thats $12,697 more than your original loan! Yikes. That blows.
- But lets say you decided to pay just 20% more than your minimum payment each month . That would put your monthly payment at $512.14which means youd pay off your entire loan in about eight years and save $2,794.04 in interest ! Thats more like it.
- If you paid over 20% more than your minimum payment each month, youd pay off your loan even faster . You get the picture!
All that said, if youre having trouble even making the minimum payment each month, you might think the idea of paying more money is a pipe dream. With that in mind . . .
Don’t Miss: Usaa Classic Car Loan
How Does A Student Loan Calculator Work
To use the calculator, follow the steps listed below:
Once youve input the right values, click calculate to see how much your monthly payment will be.
Find The Loan Thats Right For You
Knowing which loan is right for your situation can be challenging, whether youre just starting out on your college journey or looking to refinance outstanding loans for a better rate. Thats why Mint has put together an easy one-stop shop to find the best loans for your personal finances.
- Visit our Student Loans page to find out more
Find the loan with a rate, origination fee, discounts, and terms that work best for you.
Don’t Miss: Fha Limits In Texas
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.
Whats The Fastest Way To Pay Back My Student Loan
Some people recommend the snowball method to pay off your loans the fastest, while others recommend making a payment every other week. The reality is that there are various strategies for , but there is no one-size-fits-all option. Do your research, budget wisely, and do what works best for you and your financial situation.
Don’t Miss: Auto Loan Formulas
Alternative Methods Of Managing Mounting Debt
Sometimes, individual borrowers may struggle in situations where they simply cannot repay their mounting debts. A lack of financial means, serious illness, and a poor mindset are some of the reasons this occurs.
In the U.S., borrowers have alternative methods that can salvage their situations. They should carefully weigh these options and assess in detail whether they should use them or not, as many of these methods may potentially leave borrowers worse off than before. Higher costs, lower credit scores, and additional debt are some of the possible consequences. For these reasons, some personal financial advisors suggest avoiding the options listed below at any cost.
Debt management first involves consulting with a credit counselor from a credit counseling agency. The U.S. Department of Justice contains a list of approved credit counseling agencies by state.
Suppose they deem a debt management plan viable. In that case, the credit counselor will extend an offer to the debtor. The agency will take responsibility for all their debts every month and pay each of the creditors individually. In turn, the agency requires the debtor to make one monthly payment to the credit counseling agency and possibly other fees. Usually, credit counselors will also require debtors to avoid opening new lines of credit and close their credit cards to avoid accruing new debt.
Which Loans Should I Pay Off First Your Guide To Debt Repayment
Over our lifetimes, we make a lot of expensive purchases many that we cant afford without taking out a loan. Student loans for paying college tuition. Mortgages for buying a house. Auto loans to secure a brand new car. Even general lifestyle expenses can add up quickly on a credit card.
Combine each of these loan types and youve got a hefty outstanding balance. According to Experian, the average U.S. consumers total debt was $92,727 in 2020. This leads to a common, yet tricky question: Which loans should I pay off first?
To help you figure it out, we compiled a guide to the various types of loans and how you can prioritize repaying them.
2021 Auto Refinance Rates
Recommended Reading: Can I Refinance Fha Loan
How Long Will It Take Me To Pay Off My Student Loan: Uk
In the UK, student loans are repaid as a percentage of earnings, and only when your annual income is over a certain threshold. So when youre not earning or not earning much you dont need to make any loan repayments.
Of course, interest still accrues over this time, so any downtime where youre not paying off your loan means that there will be more to repay in the long run. However, and this is the critical part, the slate is wiped clean in the end there will never be a knock at the door demanding a huge, snowballed sum of money if youve been making low or no repayments.
Depending on the year in which you took out your loan, it will simply be written off after 25 years, 30 years, or when you turn 65. Phew. For this reason, repaying a student loan in the UK can be considered to work a bit like a graduate tax, applied in a similar way as income tax or national insurance.
Start Your Emergency Fund
An emergency fund is critical when you need to replace your tires or get unexpected dental work. If youve sent all available cash to your student loans, you may have to put those expenses on a credit card costing you more money over time.
Ideally, your emergency fund should include three to six months’ worth of expenses. But that can feel about as intimidating as paying off student loan debt. Instead, aim to save enough money to feel comfortable, but not so much that it kicks your other goals down the road.
If all you can afford to put aside right now is $500, that will get you out of many common jams add more once youre in a better financial position.
Also Check: Usaa Bad Credit Auto Loans
Student Loan Pay Off Calculator
This student loan pay off calculator shows you how much time and money you can save by making extra monthly student loan payments. Should you make extra student loan payments now? That may sound counterintuitive during the Covid-19 pandemic when many borrowers are struggling to make one payment and federal student loan payments are temporarily paused. That said, here are two ways to save money. First, make an extra student loan payments each month. Second, you can choose a pay off date, and this calculator what your student loan payment would have to be to meet this target date. For simplicity, this calculator assumes the federal student loan forbearance has ended. If you use this calculator while the temporary forbearance is active, your savings will be even higher because your federal student loan payments, which are optional, will directly pay off your principal balance first.
Why This Calculator: This student loan pay off calculator shows you how making an extra student loan payment or higher student loan payment can save you money on your student loans.
Example: Let’s assume you have $80,000 of student loans, a 7% average interest rate, and a $929 per month student loan payment. Now, let’s assume you pay an extra $100 per month on your student loan, for a total of $1,020 per month.
Extra Payment: With only a $100 per month extra payment on your student loans, you would save $4,561 and pay off your student loans 1.33 years earlier.
Other Opportunities To Pay Off Debt
You can use extra money to pay down student loan debt, but if youre trying to save on interest, consider paying off any high-interest debt first. You may also want to use the money to pay yourself by adding to your emergency and retirement funds.
If you cant spare more money each month for your student loans now, here are three times when extra funds in your life could mean a bigger, one-time payment.
Windfall money. Unless you win the lottery, windfall money usually comes in the form of a gift, job bonus, legal settlement or inheritance. You can use this money to make an extra student loan payment.
Tax refund. When you file your tax return each year, you might get a federal or state tax refund. The average refund for the 2019 filing season is $2,729, according to the IRS. Thats a healthy chunk of change that could go toward student debt.
Pay raises. If you get a raise, you could hold off on increasing the size of your budget and use the additional money in your check toward your student loans.
About the author:Anna Helhoski is a writer and NerdWallet’s authority on student loans. Her work has appeared in The Associated Press, The New York Times, The Washington Post and USA Today. Read more
Don’t Miss: Capital One Auto Pre Approval
How Much Do You Need To Borrow For College
How much money you need for college can vary depending on many different factors including whether your school is private or public, in-state or out-of-state and whether youre receiving financial aid like scholarships and grants.
Before taking out a private student loan, its a good idea to exhaust all options for financial aid. Applying for scholarships and grants, using any savings you have, and applying for federal aid by can help make your private student loan as small as possible.
Weve combed through the latest research to give you an estimated cost of college, based on national averages:
What You Will Need
- Loan AmountThe full balance of your loan when you first receive it is your loan amount. If you borrowed $24,000, this is your loan amount.
- Interest RateYour interest rate is the extra amount you pay each month for your education. If you look at your loan documents, youll see this expressed as an annual percentage of your loan balance.
- Term The term is sometimes called a loan period and is the amount of years its expected to take to make your repayments to your lender.
- How Much Extra You Can Pay Each Month?If you find you can make extra payments each month, this amount will go toward your principal balance. This helps you avoid excessive interest and helps you to pay your loan off more quickly.
Recommended Reading: Car Refinance Usaa
Increase Monthly Payments To Repay Your Loan Faster