What is a student loan debt?
Student loan debt is money that students have borrowed from the federal government, private lenders, or other sources to pay for their college education. Student loans can be obtained at banks and credit unions, with federally-sponsored student loans offered through schools.
In this article, we will be discussing how to save money on student loans.
Federal student loans:
Federal loans are distributed by schools and the Federal government to students who have demonstrated financial need. These types of loans include Stafford Loans, Perkins Loans, PLUS Loans for parents, as well as subsidized and unsubsidized direct loans from the US Department of Education. Interest rates vary but can be fixed or variable depending on when a loan was taken out.
Private student loans
Students who do not qualify for federally sponsored education funding may opt for private education financing. They borrow directly from banks or credit unions, with educational institutions acting as a third-party co-signer/guarantor. Borrowers typically require good credit scores combined with income levels that meet eligibility requirements to secure these funds that carry higher interest rates than their federal counterparts.
How to save money on student loans?
There are several steps that you can take to save money on your student loans. Here is a list of them!
Make higher monthly loan payments whenever possible.
This step will help reduce the interest rates charged on your loans, which means more money towards paying off the actual balance itself.
If you’ve got multiple debts, focus primarily on paying off those with higher interest rates first.
It is recommended to first pay off the loans with higher interest rates. Loans with lower percentage rates are typically easier to maintain the payments with causing problems.
Make sure you know exactly how much interest is accruing on each loan.
Ensure you know exactly how much interest is accruing on each loan and what types of repayment plans exist (deferment/forbearance vs. standard). Having an idea about this information will help determine which option makes the most sense for yourself financially when it comes time to decide between them all. Of course, credit score, credit history, and income level will also factor into this decision.
Try deferring payment for a few months.
If you’re planning to take out more federal loans in the future, try deferring payment for a few months while working on getting things settled financially so that no surprise expenses are coming up right away. This can be especially helpful if it’ll take longer than six months after graduation before receiving any steady paycheck or other types of monthly stipend. Forbearance may be an option as well, depending upon which loan program you qualify for.
Refinance your loans
Refinance your loans if possible to get a better deal on the overall interest rate. This will be done through private companies most of the time, so compare rates between different institutions before making any decisions. There may already be something out there that’s more affordable than what you’re currently paying (and thus could save some money in the process).
Paying off your student loan
Paying off a loan may or may not get rid of it entirely, but that’s okay because then you’ll only have to worry about one balance.
Apply for government jobs
If you can apply to work at a federal job, the Federal Government offers special student loan repayment programs. This article explains how to pay back loans faster.
This article provides information on how to calculate interest rates and compares private and public debt repayment.
When taking out an SBA or private loan, it is important to be aware of the interest rates and repayment options.
The interest rates of private and public student loans can vary, so it is helpful to be aware of them before making a decision about repayment.
The higher the total debt that needs repayment, the more this means looking into refinancing options. The goal of creating a budget is to ensure you have enough money to afford everything without any unexpected expenses.
Don’t let your loans go into default.
Don’t let your loans go into default because this can have severe consequences on your credit history and future. If you’re already in debt to a lender, contact them about setting up an alternative repayment plan.
Take out a federal loan rather than a private loan because they have better interest rates and repayment plans.
When possible, use federal student loan repayment programs like REPAYE, PAYE, and IBR to lower your loans’ monthly payments and interest rates. This can help you make a plan to pay off your debt faster and save money in the long run.
Federal loans have better interest rates and repayment plans than private loans.
The Bottom Line
There are many ways to save money for student loans, so take the time to find the best way for you. Have you been looking for a way to save money on your student loans? We have the best options available at EdFed.