For a great number of students who choose to pursue higher education, student loans are a necessity. Taking out a loan gives you the ability to pay for your schooling so you can earn the degree that you need for your chosen career path.
While there are a great many benefits to utilizing student loans, once graduation is over and it is time to pay back the balance you owe, it can be confusing how to do this effectively. Check out these suggestions for paying back your loans.
Take Advantage of Job Benefits
Many employers these days are looking for ways to enhance their benefits packages to attract top-quality employees. One of the newer benefits that may be offered is partial student loan repayment. Your employer may offer to reimburse you for a portion of your schooling if it falls under the right regulations to count towards job training. Others may make a contribution of a certain percentage per paycheck. It’s worth finding out if your potential new job offers anything like this when you are searching for employment after graduation.
Create a Realistic Budget
Some young adults that are newly entering the workforce find themselves on their own for the first time ever and are overwhelmed with the day-to-day tasks of paying the bills and staying on budget. You can prevent yourself from overspending by creating a detailed spending plan so you know exactly what you owe and what you can afford. If you don’t know how to do this on your own, ask for help.
Know what your new salary or wage will be from your employer and how often you will be paid. Next, factor in the cost of your student loans and any recurring obligations that you have. If possible, create a budget before you find housing so you can shop around for an apartment that is affordable on your own, or look for a roommate.
When you track how much money you have coming in and what is going out, you can make sure to pay your bills on time and avoid late fees or penalties. Any money that is leftover can be divided between savings, entertainment, spending money, or even used to pay down your loan balance sooner by paying more than the minimum payment.
Pay Extra Whenever You Can
Look for ways that you can chip away at your student loan balance. Consider putting tax returns, bonuses, or income from a side job toward your loans. You may want to focus on paying off any capitalized interest first and then pay off the loans with the highest interest rate. Any additional funds that you put toward your loan balance will be helpful.
Negotiate the Interest Rate
The total amount that you owe will be higher than the original amount that you borrowed. Interest is calculated over the life of your loan and added to the total, so the longer your long terms are, the more you could end up paying. A high interest rate will also significantly increase your total financial obligation.
Some student loan servicers will give you a decrease in your interest rate with certain programs or account features. Talk to your provider and ask about the options that are available. You may be able to get a lower interest rate by signing up for automatic payments or electing to receive electronic correspondence.
Choose the Right Repayment Plan
Not all repayment plans are created equal. Both federal and private student loans have several options to choose from, but the specifics will vary for each lender. The default payment plan generally calculates your monthly payment based on a 10-year repayment term.
You will save yourself money on interest by paying off your loan as soon as possible, but sometimes you need a little extra time and a lower monthly payment, especially when you are just getting started with your new job.
When this is the case, look into an extended, or income-based repayment plan. The loan terms may be able to be modified so that you can pay the loan off over a greater time period. Many lenders will even work with you and your specific income level. They will speak with you to gather information about your employment and debts so they can calculate a lower monthly payment amount, and possibly a reduced interest rate, that you can more easily meet.
A longer repayment plan can be a huge benefit when you are struggling to make ends meet. It can prevent you from going into default and accruing fees or harming your credit rating. However, you should keep in mind that you will likely end up paying more over the life of your loan. As soon as your circumstances change, whether you get a better-paying job or free up more of your monthly income, you should speak with your loan provider to adjust the terms of your loan to be the most favorable for your situation.
Determine If You Are Eligible for Loan Forgiveness
If you work in public service, there is a possibility that you could be eligible to have the remaining balance of your student loans forgiven after you make a certain number of qualified payments. Do your research and talk to your lender to determine if there is any type of loan forgiveness that you qualify for. If you pursue this option, it’s essential that you complete all the necessary paperwork and document your progress so you stay in compliance with the program.
Increase Your Income
The higher your income, the more money you have available to quickly pay off your student loans. Always be on the lookout for ways to increase your income. Apply for promotions at work, negotiate a raise, or take advantage of better opportunities once you gain some experience.
You can even turn a hobby that you love into a money-making side hustle by selling the things that you make or the services you offer.
Repaying a loan of any kind requires effort and commitment. Now that you understand some of the best ways to fulfill your obligation, you can make informed decisions on the best loan payoff strategy for yourself and your lifestyle.
