Student Loan Basics
As many people know, the benefits of a good education can’t be measured. However, 30% of college graduates still struggle to repay their debt and find stable work.
Student loans are one of the only types of loans that lenders can provide to anyone, regardless of their location, job status, or credit score. Many federal student loans and private lenders offer low fixed rates and flexible terms. They also come with various repayment options for you to choose from.
The money you spend on paying off your loans might seem like bad debt, but if the cost leads to a higher income- this can be considered as "good debt". Make sure you know about the things to consider and how setting up your payments can work for you.
Considerations for Repaying Student Loans
In 2021, a record-breaking amount of student loan debt totaled $1.61 trillion. If you’ve been feeling that you have also contributed to this, it’s time to start your student loan repayment plan.
Sorting Your Debt
Write down all the loans you have taken out onto a list. Assign each loan onto a list, noting their due date and total monthly installments.
- The interest rate
- The lender (from whom you received the loan)
- The amount of each loan
- The due date for each monthly payment
- The monthly minimum payment
Paying your debt each month will help you avoid missed payments and keep track of the overall progress. It's best to make a plan before incurring more debt - your student loan interest rates may be different from other types of debt, so it may make sense to pay off loans with the highest interest rates first.
Repayment Plans
Once you're aware of the total amount of the loan and who all you owe, you can take advantage of a payment plan that realistically works for your financial situation.
Short-Term Repayment Options: If you have a few hundred dollars extra each month, go for the short-term repayment plan. It requires you to make larger monthly payments but saves more money in interest.
Long-Term Repayment Options: If monthly payments are too high, consider long-term repayment plans. This will help you pay back your student loans over the next ten years.
Income-Driven Repayment Options: Your servicer will work out how much you should pay monthly in order to cope with your debt. After a given period, you may be eligible for loan forgiveness, which clears the balance that is left. However, this might lead to it being counted as taxable income afterwards.
Other aspects to consider when taking out a college loan
Aside from preventing late payments by remaining consistent each month or allowing an automatic deduction from your checking account, here are some other aspects to consider:
- The grace period after graduation is a good opportunity to take care of any outstanding debts you may have. This will allow you to start the new phase of your life without excess financial pressure and stress.
- You can save yourself the hassle of managing all your loans by consolidating them into one. For example, if you have multiple loans with different loan-term lengths, they'll now be combined into one single monthly payment that you need to pay back over a fixed number of years.
- You can save yourself a ton of money by refinancing your existing debt. Place your old loan on a new one with an interest rate that's lower than what you're currently paying for.
- If you have any chance of getting extra money from things like tax refunds, bonuses, or monetary gifts, put them towards your debt payments.
How to Pay Off Your Student Loan Debt Faster
When you have student loans, it can be difficult to save enough money for a house or car. However, the more you pay off your college debt now, the more money that will be available to you in the future.
Paying According to Interest Rates
Often, it is best to rethink your list of loans and see which ones have the highest interest rates. Switching out these loans for a lower one can help you pay off your debt faster and decrease your risk of doubled debt in the future.
Instead, try to pay more than the minimum amount required and set aside extra money for your student loan payments. Dispersing this "found money" should make the student loan seem less overwhelming, because it will decrease the total amount due.
Use a Shorter Payment Term
Many graduates may not be able to afford the shorter payment terms that come with college loans. However, it's worth it for those who can.
Extended payment terms can make it less expensive to service debt each month, but will likely cost more in the long-run if you are not able to pay off your account balances in full at the end of each billing period. One of the benefits of short payment terms is that you'll need fewer billing cycles and, as a result, less interest.
Repayment Assistance
Graduates can get help from their previous workplace to repay their tuition or other expenses. In order to speed up the debt repayment process, employers sometimes provide a monthly credit that goes above and beyond the standard minimum. This can help you to pay back your debts much quicker.
Here are some ways students can make their student loan payments more manageable today
Other students may not want to extend their payments but may be interested in lower monthly payments. If that's the case, there are a few other options you can try: you could consider a graduated or income-sensitive plan that lets you adjust your monthly payment each month.
Refinancing Your Loan
Private lenders do not usually allow for payment plans and some students may find it hard to borrow more money. However, student loans can be paid off faster with borrowed money from providers like Greater Alliance Federal Credit Union, who provide the flexibility of making the borrower pay back their loan sooner while still receiving some benefits. When refinancing, compare your current mortgage interest rates to the lender's. You'll benefit from a lower monthly payment and may have an extended repayment time on your loan.
Automatic Payments
For example, automatic bill payments: a set amount of money transfers from your bank account and over to your loan provider on a monthly basis. While you won’t be able to change your monthly billing cycle, you can benefit from reduced interest rates of up to 0.50%. This will help you save a lot of money over time!
Banking with Greater Alliance Federal Credit Union is Easy
Student loans take control of your life and, if you find yourself with serious debt, it may be time to look for a good place for help. At Greater Alliance Federal Credit Union, we offer student loans up to $120,000 for undergraduates and $160,000 for graduates which can be compatible with your situation.
Good to know you are with us. Our new 0.25% interest rate reduction & other incentives are designed to make it easy for you to be our partner. The main reason for refinancing your student loan is to ease the burden. Regardless of the need, you can count on changing the interest rate to one that reduces monthly payments and helps alleviate some stress.
To help you better understand your options for student loans, feel free to schedule an appointment by calling 888-554-2328 today.
