The cost of education is rising each year and as a result, college students are taking up more loans to finance their studies and stay in school. Scholarships and grants may be helpful, but sometimes are insufficient to keep one going. The difficult part comes when you have to repay the loans, especially if you are on shallow pockets. Student loans can linger on in your life and cripple you from even saving for your future. These tips should help you lower your loans and ultimately clear them off your books;
Deal first with variable private loans
Even though the loans from banks and credit unions attract cheaper interest rates compared to fixed-rate federal and private loans, they are dependent on market forces and may rise in future. That is why it is necessary to clear them off your back as soon as you can. Federal loans attract fixed interest rates and can be handled at a slower pace. Pay twice the minimum amount for the variable loans to fast track its clearance and only commit the minimum monthly payments for the federal loans.
Sign up with the lenders for auto-deductions
It makes your life easier. It also attracts lesser interest rates- for all federal loans and some private loans- if your monthly payments are automatically deducted from your account. This reduces your repayment period by almost a year and saves you some money. It doesn’t matter how long you have been paying your loan, you can always sign up for auto deductions.
Consider your repayment plan
Depending on the type of loan you’re taking, there are different repayment plans. The standard repayment plan is a minimum monthly payment of $50 up to a maximum of 10 years. You can also opt for the income-based plan. The plan takes a percentage determined by the federal government off your income up to 25 years after which the loan is written off. Lower monthly payments often mean higher interests during the loan’s life span. The ideal plan would be to commit 10% of your gross earnings into loan repayment.
Ask your employer to chip in
This practice is not widespread but can be a welcome relief, not only for you but also your employer. Your employer is most likely to save more on salary payments in the long run by making a one-off loan payout. Even though you’ll earn lower wages for a while, you will have one mountain off your back. You can bring this up during salary negotiations in a new job. Commit to the job for a specified period of time and take lower wage in exchange for loan repayment. Browse through Withmydegree.Org for tips on how you can get your career running, regardless of your field of study.
Consolidate the loans
If you have multiple federal loans, consolidate them into one loan. There is no financial benefit to this, it would however save you from having to keep track of different payment deadlines. In the long run, you will have saved some money from not paying penalties for late payments. It is unlikely though that you will be able to consolidate variable private loans.