Staying on top of your loans can seem like a never-ending struggle. On the one hand, you have to keep track of multiple payment amounts and due dates. On the other hand, you have to figure out how to get the funds to repay the debt. But dealing with student loan debt doesn’t have to be so stressful with these great tips.
These student loan repayment tips will help make it easier to manage your student loan debt and keep your budget on track.
1. Know Where to Find Your Student Loan Details
Do you know where to find your student loan details such as payment amounts and due dates or the lender’s name and contact information? You can’t manage your loans if you don’t know where to look for the relevant information.
- For federal student loans – Sign in to your Federal Student Aid (FSA) account. Once you log in, you’ll be able to see all the details you need including your loan servicers, current balances, payment details, and more.
- For private student loans – Log in to the online portal that each lender has provided you with. When you log in, you should be able to view balances, and due dates, and also make payments. If you’ve forgotten the lender’s name, check your credit report. All your debt will be listed there. You can request a free copy of your credit report at AnnualCreditReport.com.
2. Create a Spreadsheet with Your Student Loan Information
Getting organized is one of the key tips for dealing with student loan debt.
And creating a spreadsheet with your student loan information is the first step towards getting organized.
Enter these details into your spreadsheet to get an overview of all your loans at one glance:
- Loan issue dates
- Current balance of each loan
- Interest rate of each loan and whether it is a fixed or variable rate loan
- First payment date and amount to be paid
- Loan term
- Applicable fees such as early payment penalty
- Lender’s name and contact details
Having these details in one sheet will help you decide the best course of action. For example, you can see which loan has the highest interest and maybe focus on paying off that loan first.
3. Calculate Your Total Debt & Total Monthly Payments
During the four years in college, you may have taken multiple loans. Each loan amount may seem relatively small, but together they can add up to a significant amount. Add the monthly payments to determine the total amount you need to pay back every month toward your loans. Knowing your total debt can help you make a solid plan to pay it down, consolidate it, or maybe explore forgiveness.
4. Review the Grace Period for Each Loan
Most student loans come with a grace period during which you don’t have to make any repayments. You only start making payments after the grace period ends. For most loans including Stafford loans, the grace period starts six months after graduating. Perkins and some other loans give you a grace period of nine months after graduation.
Although you don’t have to make repayments during the grace period, interest on all loans keeps accruing right through. Direct subsidized federal loans are an exception. The federal government pays the interest until the grace period ends in this case.
If you have the money, it’s smart to start paying off your private loans and Direct unsubsidized loans during the grace period itself. This can save you thousands of dollars in accrued interest.
5. Explore Your Student Loan Repayment Options
Private student loans generally don’t have repayment options but federal student loans do.
With federal student loans, you’re not stuck with the standard 10-year term. If your income is limited and you can’t afford to make monthly payments, you can choose from multiple income-driven repayment plans. These plans allow you to adjust your monthly payments according to your income so they are always affordable. Moreover, you can change repayment plans anytime your income changes with no extra costs or fees. Switching to an income-based repayment plan can help to lower the risk of defaulting on your loans, which can have serious consequences.
6. Sign Up for Autopay
When you sign up for autopay, you give instructions to your bank to transfer the monthly payments directly to the lender’s account. This ‘set-it-and-forget-it’ repayment strategy has several benefits. For one, all payments go out on time every month. You don’t have to remember due dates or write out checks every month.
Additionally, some lenders will give you a 0.25% interest rate rebate when you sign up for autopay. It may seem like a small amount but the savings can add up to a significant amount over the life of the loan.
7. Pay Off Loans with Higher Interest First
If you have extra cash after making monthly payments on all your student loans, put it towards paying off the most expensive loan. That would be the loan with the highest interest. Keep doing this until that loan is paid off completely. Then start paying off the loan with the second-highest interest.
Remember to always request the lender to put the extra cash towards the principal, not the interest. Since monthly interest is calculated based on the principal, less principal translates to lower interest. The sooner you lower the principal, the less interest you’ll pay over the life of the loan.
8. Consider Refinancing Your Student Loans
Refinancing can be one of the best ways to manage or even lower your student loan debt. But only if it’s done right.
Refinancing involves exchanging your current loans for a new loan with a new interest rate and different terms and conditions. The lender will quote an interest rate based on your credit score and monthly income but you can choose the loan term. There are several ways you can leverage refinancing to save money or make your payments more manageable.
– If you have a good credit score and steady income, you’ll qualify for an interest rate that’s lower than your current rate. This could save you thousands of dollars in accrued interest over the life of the loan.
– If you’re struggling financially, you can choose to lower your monthly payments when you refinance. This will make your payments more affordable so you aren’t at risk of defaulting on your loans.
– If you are earning a high income, you can choose to increase your monthly payments. This will instantly shorten your loan term so you clear your debt faster. You’ll also save a lot of money by way of lower interest accrual over the shorter term.
– If you don’t qualify for refinancing because of a low credit score, you can apply with a cosigner with strong credit. In this case, the lender will quote an interest rate based on your cosigner’s financial credentials.
Be careful when refinancing federal student loans. When you refinance federal student loans you’ll lose all benefits associated with the loan. If you think you may need any federal loan protections, consider refinancing only your private student loans. Learn more about student loan refinancing and its pros and cons.
Whatever You Do, Don’t Let Your Payments Lapse
Defaulting on your student loans can have a lot of serious, long-term consequences. You’ll pay a late payment fee and interest on the missed payment. This makes the loan more expensive and pushes you further into debt. Secondly, missed payments reflect on your credit report and damage your credit score. It will also make it more difficult to get approved for a low-cost loan in the future.
Use the student loan repayment tips listed above to stay on top of your payments and protect your finances and your credit score. If you’re experiencing financial hardships, talk to your lender to find a solution that works for you.