How You Can Manage Your Student Loan Better
Paying off your student loan can be a long, arduous and many times complicated process. A student loan also can put tremendous pressure on your personal finances and can even put your credit at risk. So here are some tips on how you can manage your student loans.
Figure Out Your Total Debt
Normally, students graduate carrying more than one loan, usually a mix of federal and private loans. This is because students end up needing to arrange for new financing for each year they spend in school. Once you know exactly how much you need to pay, then you can look at options: paying it off as is, student loan consolidation or student loan forgiveness.
Understand the Terms of Your Loan
Once you know exactly how much you owe, you need to understand the terms and conditions of each loan. This means understanding the interest rates on each student loan and well as the repayment rules. The Department of Education has several Loan Repayment Options that can help students decide how best to pay off their loans. Also find out about the grace period on each of your loans so that you can build that into your repayment plan.
Student Loan Consolidation or Refinancing
If you have multiple loans, you also have the option of streamlining all your loans into one single monthly payment option. There are two ways in which you can do this – consolidation or refinancing. For student loan debt consolidation, you have the choice of putting all your federal loans together – the Department of Education can help you understand how you can consolidate your federal loans. For student loan debt refinancing, you take out a new loan from a different lender who will buy out your old student loans. The advantage to this is that you can get lower interest rates as well as lower monthly payments. The down side to this is that you lose the protection afforded by federal loans.
Target Higher Loans First
Prioritize your loans if you don’t plan to either refinance or consolidate. Pay off the loan with the highest interest rate first. So, if you have three loans – $100 at 4%, $100 at 5% and $100 at 6% interest per month, pay off the 6% interest student loan first.
Pay Extra Principal
Try as much as possible to pay more than then minimum amount on your loan. This will help you pay off your student loan faster.
There are some student loans lenders that will give you a discount on the interest rate if you set up a payment option where the monthly payment is automatically debited from your bank account every month.
In extreme circumstances, you may be allowed to apply for student loan debt forgiveness. However, this is a very rare option, so you can use it only if you are facing extenuating circumstances such as total and permanent disability, or that your school closed down before you finished your graduation, etc.