If you have been researching ways to manage student loans, chances are you have come across several tips for keeping debt under control and preventing issues down the road. Below are a few recommendations designed to keep student loan debt manageable.
First step to successful loan repayment: understanding your specific loan terms and conditions. From there, create a plan to pay off loans quickly while minimizing extra interest fees and charges.
1. Know Your Options
Navigating the complex world of student loans requires some investigation. If you haven’t already, make an effort to learn what your debt(s), loan terms and repayment options are.
Understanding your eligibility for various programs that can assist with managing or even forgiving student debt can also be key. For instance, certain federal loans offer income-driven payment plans which reduce monthly payments depending on how much income is generated and family size.
If you’re having difficulty making your payments, request an alternative due date or deferment option. Being informed is crucial because late payments can damage your credit score and make qualifying for future loans more challenging; paying on time builds an excellent credit history.
2. Make a Budget
Create a formal budget can give you financial clarity and control. A budget enables you to see exactly where money is coming in from and going; and can also assist with prioritizing debt payments by making sure they come first among expenses. Though you don’t need to live off rice and beans exclusively, even small changes could free up enough cash for major impactful changes in spending patterns.
Start by calculating your net income – this number represents your total monthly income after deducting expenses such as taxes, health care premiums, and retirement contributions – then consider how to utilize any budget surplus funds, such as an income-driven loan repayment plan.
3. Pay Extra Toward Your Loans
Paying extra towards your student loans may help speed up their repayment and save money in the long run.
Before making any drastic adjustments to your budget, it is wise to establish an emergency savings plan. Draining this fund simply to try to pay down student loan debt early can have devastating repercussions.
As part of making extra payments, it’s important to specify how they should be applied so your lender treats them as principal-only payments and not advance them toward next month’s payments (something some servicers will do by default). You can usually do this online or via your phone app; additionally, check your statements regularly to ensure your servicer is applying extra payments as intended.
4. Pay Off Your Loans Ahead of Schedule
When it comes to managing student loans, there is no one-size-fits-all approach. But there are steps you can take to pay off debt early and strengthen your finances in the long term.
Most federal and private loans begin repayment six months after you graduate, leave school, or drop below half-time enrollment. During this six month period, interest continues to accrue until payments are made in order to stop it.
Ask your loan servicer to apply extra payments towards the lowest balance or highest interest rate first, to expedite repayment and lower interest costs. Nevertheless, be sure to double-check that they’re following your instructions; otherwise you could end up worse off.
5. Make Payments on Time
Making timely student loan payments is key to successfully managing them, helping to avoid late fees and maintaining your credit score. If you find it challenging to meet this obligation, try setting up automatic payments with your lender – this may make life simpler!
Alternatively, if you can afford to make extra payments beyond what is necessary each month, do so; doing so can reduce interest payments in the long run and you should contact or email your loan servicer about how to use any additional money provided – ideally make sure they apply it against your current balance rather than next month’s payment as this will help speed up loan pay-off timeframes.
