How to Save Money On Your Student Loan Repayment
As university tuition rises each and every year, a large portion of college students are forced to indulge in the necessity of student loans. At any rate, students have plenty in common to talk about when it comes to how they financed their higher education. The general topic of conversation usually involves a distinct lack of enthusiasm at the prospect of paying back what was borrowed.
More and more students are graduating with thousands of dollars in debt to their names. As the student loan debt toll rises above $1.3 trillion nationwide, students find themselves significantly burdened by the price tag on their heads. In fact, the average price tag is over $30,000 per student, and this number increases every year. The effects of this debt is shown to last a long time with retirement funds, home purchases, and other life moves getting put on the back burner.
Plainly put, the elimination of a student loan requires a considerable amount of work and determination, but it also requires quite a bit of foresight and planning. There are clever ways to eliminate student debt, and there are also some common ways to accomplish the daunting task. Here are some pieces of advice that may help cut down student loan debt a bit faster than average.
Work a Second Job
In accordance with the notion of working hard, picking up a second job is probably one of the most effective ways to pay off a student loan faster than usual. The logic is clear; for instance, more money means more disposable income towards those pesky monthly payments. This is by far the most labor intensive method to killing of debt, but it is tried and true. Anyone who happens to find themselves falling behind on student loan payments despite working full time may have to face the reality of acquiring a second job.
There are tons of ways to work extra; it just takes a little bit of research. One of the easiest ways to earn extra cash is through freelancing. What is freelancing? It is literally any type of work that you market yourself for. For example, there are websites that hire freelance writers to provide articles and other types of content; the pay ranges from dirt cheap to fairly lucrative. It does not end there either. There are plenty of jobs people are willing pay handsomely for; another example is building ikea furniture for ikea customers.
Pay Interest During the Grace Period
One of the most despicable characteristics of a student loan is an interest payment. Basically, ten grand in student loan aid really means ten grand plus a little extra by the end of the payment plan. Interest rates accumulate each month, and they are often the main culprit leading to loan default. If a borrower does not stay on top of their interest payments, it leaves them vulnerable to an unwinnable uphill climb against debt.
One way to alleviate the strain from interest is to attack it during the grace period that follows graduation. Borrowers can help themselves out by whittling down their interest payments before having to make full principal payments. When principal payments come around, there will be less to pay on top of the new batch of interest. Generally speaking, it is a good idea to commit any extra available financial resources towards debt since it helps subtract from the overall toll.
Pick the Best Repayment Plan
When deciding what type of loan to borrow, one must consider the various payment plans that are offered. In short, there are two extreme scenarios to choose from with all other options falling in between. A borrower can either choose to make large monthly payments over a short period of time or make small monthly payments over a long period of time.
There are pros and cons to both options. For the longer payment plan option, interest builds up to a larger amount over time, so despite paying less initially, borrowers end up paying more over time. Making larger payments initially is harder on the bank account out of college, but interest does not have the chance to build up to a ridiculous sum. The best thing a borrower can do is choose a plan that is most closely tailored to their financial budget after college.
Pay Extra on Principal Payments
Putting a but extra into a monthly payment can go a long way towards reducing the amount of interest. This may be hard to do depending on a new graduates financial standing, but larger payments cut interest drastically since the principal amount is reduced sooner. A careful budget assessment is required in order to determine the feasibility of this method. If there is unspent money left aside at the end of the month, it makes sense to start contributing more to student loan debt payments.
This method is handy when choosing the long term repayment plans. With only a small monthly obligation, there is more leeway to make a larger payment when it is doable. This is a great way to combat interest after choosing a long term payment plan which is renowned for high interest payments.
Student Loan Refinancing
Many private lending companies offer a service known as student loan refinancing. It is a great way to lower interest rates and save money in the long run. This is how it works. Many borrowers have multiple loans and interest rates, or a large loan with a considerable interest rate. These borrowers use refinancing services to receive another loan that is large enough to cover the expenses of all the previous loans. With those loans paid off, now there is only one loan left with a new interest rate.
Many refinancing websites have a calculator that compares previous loans with the new refinanced loan, so it is very easy to find out how much money is saved through refinancing. For loans that are going to be around, refinancing is one of the best options to simplifying the payment process, but the biggest savings are made in interest payments which saves thousands of dollars.