Paying off Student Debt: Five Tips to Help You Out

Paying off Student Debt: Five Tips to Help You Out

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New graduates must start paying off their student debts regardless of their current status. It’s one of the things you should take care of as soon as you step out of college. Here are some helpful tips you should keep in mind as you pay off your student debt.

Try negotiating for lower interest rates

Lending companies that offer student loans sometimes have discount offers for students who set up direct deposits. Lenders usually prefer these people because setting up a direct deposit means the student is likely to continue making on-time payments. Check with your lenders if they can give any other rate deductions as well; some lenders give discounted rates to people who don’t have bad credit ratings or who have good repayment histories.

Try aiming for constant (and larger) payments

This is one of the most basic steps for effectively paying off a debt, not only for student loans but for other types of loans too. Aside from the fact that making constant and larger payments speeds up your loan repayment, this process can also help boost your credit rating. In order to figure out how much you can afford to pay for student debt, you should first take a look at how much you’re earning every month. This way, you can properly allocate your income on your expenses—student loan (and other) bills, utilities, food, rent, and so on—as well as your savings.

To lessen the burden of having to pay a large amount every month, you can opt for bi-monthly payments. This means you will pay half the amount of your monthly payment every two weeks. Just see to it that—however you choose to pay—you do not skip next month’s payment because missed payments will negatively affect your credit reports and lead to a bad credit score. Remember that your repayment history is one of the factors that most significantly influence your credit score and timely repayment is always a must.

Try creating a budget

Whatever job you end up with after graduation, it’s extremely important to start your working life with a firm budget. Your monthly budget will be the one to guide you in all your expenses, including paying off your student debt. As soon as you can, create a plan concerning where your money should go as soon as your paycheck arrives. This will help you save enough money each month to be able to pay off your debt.

Try choosing from different repayment plans that suit you

Repayment plans are options you can take depending on your current financial status. They include graduated repayment plans, income-sensitive repayment plans, and extended repayment plans.

  • Graduated repayment plans usually last up to 10 years, and the payments start off low during the first few years, gradually increasing every two years.
  • Extended repayment plans are suitable for people with a low financial status because you can extend the life of the loan for up to 25 years. While you will end up paying more for the actual loan, your monthly payments will be significantly lower than the standard 10-year plan.
  • Lastly, income-sensitive repayment plans are based on your annual income, with the amount increasing or decreasing depending on your income.

Try consolidating your student loans

Loan consolidation is very handy if you have several student loans to pay off. It directs your entire loan into a single payment so you don’t have to pay off different lenders or services and you only have to worry about making one payment every month. While the interest rate is high, you can try to alleviate the cost by negotiating for discounts with your lender and choosing a payment plan that suits your current financial position.

Amy Johnson is an active blogger who is fond of sharing interesting finance related articles to encourage people to manage and protect their finances.

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Categories: Student Aid

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