Here Are 5 Tips to Help Pay Off Your Student Loans
College is expensive—just ask the 69% of 2018 graduates who have taken on student loan debt as a part of their graduate plan. No matter how much you save for college, it’s almost inevitable that you’ll have some amount of student loan debt on your account when you graduate. But fear not, grads! Follow these 5 tips to pay off your student loans ASAP and get back to flexing your applied knowledge out in the workforce.
Read the fine print
Knowing the ins and outs of your loan agreement is crucial to paying off any loan—whether it’s a student loan, mortgage, or personal loan. Being clear on expectations with your lender can help you avoid penalty fees that could get you into trouble later on if you miss a payment, make a late payment, or underpay your monthly loan dues.
Make sure to have the loan agreement in print and take this document into consideration as you plan out your budget. Beyond incurring late fees, not paying your student loans according to your loan agreement could result in a defaulted loan—which could translate to consequences like garnished wages, tax offsets, legal action, and other debt collection measures. Additionally, a defaulted loan could result in serious damage to your credit score that could take months, even years to recover from.
Create a budget, and stick to the plan
When you’re working on a post-grad budget, it can be tempting to skip out on a student loan payment in exchange for a concert ticket, night out, or even just to subsidize your standard living expenses. But as we previously mentioned, the repercussions of not paying your student loans can be far worse.
As you select a student loan and create a budget for your monthly payments, it’s important to come up with a reasonable number that allows you to meet your fixed, necessary expenses and while sticking to your due dates.
Set up automatic payments
Most lenders allow borrowers to set up automated payments so that loan payments are automatically deducted from their bank account. This can help avoid accidentally missing a payment by holding you accountable for each month’s dues.
Increase your monthly payment if you can
If you were lucky enough to score a great job after graduation, use the extra income to your advantage and pay off as much of your student loan debt as you can! Paying your student loans off quicker can help you put more money toward the loan itself, instead of accruing additional interest that ultimately increases the total amount you’ll pay for your student loans. This doesn’t mean you have to sacrifice celebrating your accomplishments as a college student and a new professional in the workforce; just be strategic about where you allocate your funds to make the most of your salary and boost your savings in the long term.
If increasing your monthly payments makes sense for your budget, talk to your lender about adjusting your repayment plan. Some lenders apply prepayment penalties on borrowers that pay off their student loan balance before their loan term is up. Just be sure to follow Tip #1 in our guide, and read the fine print before making any changes to your loan agreement.
Consider loan refinancing and consolidation
Another way to simplify your loan repayment process is to consider consolidating or refinancing your student loans. If you have more than one student loan to pay off to different lenders, it can be hard to keep track of how much to pay and to whom. Consolidating your loans basically means you’re combining multiple loans into a single loan account with a weighted interest rate. This one loan is paid to one lender, rather than different ones for each of your loans.
Refinancing a student loan means taking your existing student loan debt and asking a new lender to finance it. Ideally, this new (refinanced) loan would offer a better interest rate or loan terms that could help you pay off your loan sooner or with less fees.