Would you like to save thousands of dollars on your student loan?
There are 44.2 million people in the US with student loan debt. You’re not alone.
Even though your student loan debt may seem insurmountable, there are some very easy and clever ways to significantly cut down your overall debt.
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If You’re Struggling To Pay Off Your Student Loan, These Tips Will Get Those Loans Paid Off As Fast As Possible
Private Vs. Federal Loans
A good place to start is knowing which type of loan(s) you have: federal or private.
- Federal loans are loans directly from the government and are typically easier to manage.
There are many good services that offer federal student loan forgiveness if you need help managing your debt.
- Private loans are through private companies.
You may have opted for this type of loan when you began your education because they usually offer some kind of deal that was more applicable to your situation.
The downside of private lenders is they aren’t as understanding when it comes to paying off your debt. Federal loans too have their downside. For example, Parent PLUS Loans typically have the highest interest rate of any federal student loan, which can cause your loan balance to soar with such high rates, making refinancing Parent PLUS Loans a smart financial decision for many families.
Over the long-run, most people will run into a financial crisis that makes paying your loan on time difficult or even impossible.
But not to worry, whether you’ve got a federal or private student loan, there are good ways to manage your debt.
When to Pay
Your best strategy is to pay every loan payment on time every time.
This may seem obvious, but every time you miss a payment you risk penalties.
You’re also delaying the inevitable: you have to pay sooner or later, and sooner is better than later when it comes to student loans.
There’s also the problem with accruing interest.
If you don’t make regular payments on time, your balance doesn’t go down which means your loan just got a little bigger.
This can add up to thousands of dollars over the years from what may seem like an innocent oversight.
Here’s a tip: right after making your scheduled loan payment, make another payment (however much you can afford) the very next day.
Why? Lenders tend to apply your payments in this order:
- To charges or late fees.
- To unpaid accumulated interest.
- To your principal amount.
What this means is, your monthly payment doesn’t really affect your principal that much.
But if you pay a little extra the very next day, that payment will go straight to your principal whittling it down much faster over time.
Set up an auto-payment reminder in your calendar or bill-payment system. This one little extra step is worth the effort.
Tip: make sure this extra payment is going directly to your principal and not to your next monthly payment.
If that’s not an option online, call them up and make sure they apply it to your principal.
Otherwise, your extra payment will just sit there waiting to be applied to your next monthly payment.
Which Loans to Pay First
We all have extra debt outside of our student loans. Which should you tackle first?
You need to think long-term for this: what does your emergency or retirement fund look like?
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These may seem like non-essentials, but if you experience financial hardships in the future, money for rent and food are far more important than your student loan. It can wait.
- Know more here on how you can refinance student loans.
Finally, pay off your credit cards first and foremost. These invariably have the highest rates and are probably doing the most damage to your bottom line.
Take these tips, make a good strategy that fits you, then stick to the plan. Your future self will thank you.