Paying off Student Loan after Graduation
My biggest fear after graduation is paying off my student loan, as I do not know when I will get that good-paying job. However, after reading expert reviews, I have learned some tips which can help me handle the situation. One thing is certain though; the more I pay towards my loan, the less interest I’ll owe my lender, and the quicker I will finish repaying. The following are some of the tips that I will consider:
If I find myself hesitant to refinance my loans, I will sign up for autopay as a potential way of lowering my loan’s interest rate. If I let the loan servicers automatically deduct payments from my bank account, then I stand a chance of getting a quarter-point interest rate discount. Several private lenders also offer an autopay deduction service.
One certain way of paying off my student loan fast without incurring extra payments is by refinancing it. By refinancing, I can settle several student loans using one private loan, which usually comes with a lower rate. Still, I can speed up repayment by choosing a loan term that is below the amount left on my student loan.
Whereas a shorter payment period is likely to increase my monthly payments, it can go a long way in helping me settle the debt quickly, thus saving some money on the interest. To be in good books as a candidate for refinancing my student loan, I will endeavor to have a debt-to-income ratio of less than 50%, a solid income, and a credit score of 600 and above.
However, experts warn that if I need programs such as income-driven repayment and Public Service Loan Forgiveness, then I shouldn’t refinance my federal student loans.
There will be no penalty if I decide to pay my student loan early or more than the minimum, although I know that there’s a caveat put by student loan servicers. They may decide to impose an extra amount on my payment the following month.
Such a move only advances my due date, but it doesn’t help me to pay off my loan faster. That’s why the servicer, either by mail, by phone, or online to apply payments to my current balance and retain next month’s due date as is.
This way, I have two options; to either make a lump-sum repayment of my student loan or make an additional payment anytime in the month.
One simple strategy here is to trick myself into paying more on my debt: rather than making a full payment at the end of the month, I pay half of my payment fortnightly. This way, I will extra payments annually, thus cutting time off my repayment plan and money off my interest costs.
If I find money from unplanned sources such as a financial windfall, a student loan refinance bonus, or a raise, then I will allocate a portion of it to pay off my loan. Also, I could be lucky to get a job in a firm that will pay my loan as part of my employee benefit, I won’t hesitate to enroll in that plan. I can also use proceeds from my side hustles such as freelancing skills, selling unused gift cards, or photos and clothing to pay part of my student loan.
Just like any other student, I am on an automatic 10-year repayment schedule as stipulated by the government. If I can’t make huge extra payments, an easier way for me to clear my federal loan would be to remain on the ordinary repayment plan. The advantage with federal loans is that they come with income-driven plans, with the payoff schedule reaching up to 25 years. Still, I can amalgamate my student loans and pay off within 30 years.