Student loans can be scary! Paying off thousands in debt is no easy task, and repayment can creep up on you if you don’t have a plan. So to keep you on track, here are 8 ways you can keep your loans at bay.
1. Know who you owe
With lenders buying and selling loans, the first step to know where your loans are. For federal student loans, borrowers can track their servicer information through NSLDS.ed.gov. Your loan servicer will be your main contact for making payments and for the day-to-day handling of your federal loans.
For private loans, you should consult their original loan paperwork. If this is not an option, request your free credit report. Your credit report will list all of your creditors, including private loan lenders.
2. Keep in touch
Now that you know who you owe, stay in touch. At the first sign of repayment trouble, contact your lender to discuss your options. Ask about different repayment plans, or if deferment or forbearance options are available.
3. Choose the right repayment plan
Federal loans, and some private loans, have a variety of payment options to choose from. The standard 10-year repayment plan for federal loans will eliminate your debt faster, but monthly payments will be higher. If you’re looking for a lower monthly payment, Income-Based Repayment or Graduated Repayment may be better options for you. Do some research or discuss your different options with your lender.
4. Pay off your private and most expensive loans first
Private loans typically have less repayment benefits, so it’s a good idea to pay these down first. These are often borrowers’ higher-interest loans anyway, so to save money in interest over the years, paying your expensive loans early is a good plan.
5. Put extra cash towards your principal
While paying off your interest is good, paying off your principal is better. Payments are typically applied to interest first, and principal second, so while it may seem like you’re making progress, interest is still accruing on your large principal balance. If you make extra payments, you will need to specify to the lender that they should be applied to your principal.
6. Find your consolidation options
If you struggle making monthly payments or simply have too many loans to keep track of easily, consolidation could be a good option for you. Federal loan consolidation combines all federal loans into one loan with a longer repayment period. This lowers your monthly payment, but not your interest rate.
For private loans, consolidation can be a great way to potentially lower your interest rate – especially if applying with a cosigner. Federal loans should NOT be consolidated into a private consolidation loan because this will wipe away any federal benefits on the loan.
7. Know your deferment and forbearance options
8. Don’t ignore your loans
The absolute worst thing you can do when repaying is to ignore your debt. Don’t let your debt overwhelm you, and instead, take a proactive approach to repayment.
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