Congratulations on earning your college degree! If you're like many graduates, a diploma may not be the only thing you picked up. Got student loans? You may have missed one important class in school: Student Loan Repayment 101.
But don't worry by applying the same dedicated effort to loan repayment that you employed to earn your degree, you can take control of your debt. Here are seven smart tips to ease the burden faster.
Start with an overview.
You may have more than one loan; check the amount and interest rate on each. Consider whether it would be advantageous to consolidate your private student loans. That means rolling all your existing loans into one loan with one payment. It would simplify repayment and, depending on your specific loans, might lower interest rates or make payments more affordable. If your credit score has improved since you originally applied for the loans, you may be rewarded with a lower interest rate. But there may be tradeoffs; you may give up benefits that are part of your current loans. If you have both private and federal loans, they cannot be consolidated together; they must be handled separately.
Choose a repayment plan.
Check with your lender to find out about repayment plan options for private student loans; picking the right one can make repayment easier.
Pay off your loan faster.
Instead of making a monthly payment, consider making a payment of half that amount every two weeks. That way, you squeeze in an extra full monthly payment every year. For example, if your monthly payment is $250, you would normally pay $3,000 over the course of a year. But if you pay $125 bi-weekly instead, you'll pay $3,250 in a year. Paying off your loan faster can reduce the overall amount you spend on interest charges. However, check to be sure there are no prepayment penalty fees. If bi-weekly payments don't work for you, how about adding an extra $10 or $20 to every payment?
Trim your expenses.
Remember this mantra: If you don't need it, don't buy it. Minimize major expenses like rent or mortgage and car loan payments. Moving in with your parents or sharing a house or apartment with roommates can free up money.
Earn extra income.
Pick up a part-time job or use your skills and talents to create something you can sell for extra income.
Save more with a tax deduction.
See if you qualify for a student loan interest tax deduction. You don't need to itemize deductions; this deduction is claimed as an adjustment to income. Then apply your tax savings toward your student loans.
Check for accuracy.
Verify that your loan payments are being applied correctly by reviewing statements from your lender carefully.
This article is intended to provide general information and shouldn't be considered legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.