People who borrow money to pay for school are often left with one question: What is the best way to pay off your student loans? Obviously, there is no magic bullet to this but there are surely some ways to pay back education debt easily.
In the year 2020, student loan debt reached an all-time high of 1.54 trillion; so, you are not alone. An emerging segment of the economy is devoted to helping American citizens to examine how to pay off student debt, and there is actually a lot to learn.
In this blog, we will help you to figure out easy and effective ways to manage your education debt efficiently.
Take a look at the 5 tips to handle your student loans as well as pay them off faster.
Analyze Your Total Debt
First thing first, one should clearly know what he/she actually owes. So, if you have not done this yet, do it at the earliest. Take out some time and find answers to the following factors:
- How much do you owe, in total, on all your loans?
- Which student loan services do you owe money to and how much for each loan?
- Which of your loans are federal and which are private?
- The minimum monthly payment for each loan.
- The interest rate for each loan.
Once you have figured out the answers for the aforementioned points, you can move forward to the next step that is selecting a repayment plan.
Discover Student Loan Repayment Options
Well, how you repay your loans depends on the following factors:
- The type of loans you owe
- How much you can afford to pay
- Your money goals.
Financial goals differ from person to person. While some require a longer repayment plan that offers more flexibility in their monthly budget, others may choose for a repayment plan that lets them pay off their student loans as quickly as possible.
You can find a wide range of student loan repayment options available. People who need flexibility & owe federal student loans, they should consider an income-driven repayment plan.
There are numerous choices that calculate a person’s monthly payment depending on his or her income, household size and provide him or her with more time to repay loans than he/she gets on a standard 10-year repayment plan.
On the other hand, people who want to repay their loans as quickly as possible, they should consider repayment plans that offer the shortest term.
One of the best ways to find loan repayment options is by using loan repayment calculators, such as the one provided by the Department of Education.
Utilize the Grace Period
For those who do not know about the grace period, it’s the time period in which a person is not supposed to make any payments on his or her loans.
Talking about federal student loans, the grace period normally lasts for the first 6 months after you exit the school.
Private student loans, on the other hand, depend on the lender no matter the person has a grace period and how long it lasts. With private loans and unsubsidized federal loans, interest is charged during the grace period and even “capitalized” (which is added to the total amount the person owes) after the grace period ends.
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Go For Consolidating Or Refinancing Student Loans
Both Consolidating as well as refinancing loans offer two ways to streamline student loan repayment. When it comes to debt consolidation, (or student loan consolidation) an individual combines multiple loans together at an interest rate that further reflects the average rate paid across all his or her loans. This can be done with federal student loans as well.
Automatic Loan Payment
Let us tell you, this is the easiest way to handle education debt! You just have to schedule your loan payments to be deducted from your checking account automatically every month. That means you no longer have to worry about late payments that often impact the credit score. In fact, you can even score some interest rate savings if your lender provides a rate discount for utilizing autopay—federal loan servicers as well as many private lenders do. The discount may only be a quarter of a percentage point; however, it can make a difference in how quickly you pay off the loans.
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There are more! But the aforementioned points are the easiest ones. Now that you know the right ways, tackle your student loans proactively. There are numerous ways to handle your debt more efficiently, but the worst thing you can do is nothing.