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Here Are the Details of Paying Back Student Loans
Both federal and private student loans are helpful ways to fund your higher education. These loans make it possible to pay for expensive classes, books and other education-related fees that come with college courses. Once you’ve completed your degree or program, though, you may be asking, “How can I pay off my student loan debt?”
Thankfully, paying off your student debt is a process that millions have gone through before you. While the process is straightforward, there are some tricks you may be able to take advantage of to help you out.
How to pay back your student loans
Paying off student loans may not be enjoyable, but it’s what you agreed to in return for a lender funding your education. By following the right path, you can get your loans paid off and behind you in no time.
- For federal student loans, choose the right repayment plan. Federal student loans come with eight different repayment plans to choose from. You can change your repayment plan to fit your financial needs free of charge at any point in time. You can use the government’s Loan Simulator tool to see how different plans would shape your repayment experience.
- For private student loans, explore all your repayment options. Repayment options will vary based on who your private lender is. That being said, many top lenders have multiple repayment options to mirror some of the flexibility that comes with federal student loans.
- Understand the importance of paying on time. No matter what, you need to develop a plan to stay up to date on your student loan payments. Failure to do so can result in damage to your credit, increased costs of borrowing or even getting sued by your lender.
- Set up auto-pay options. One of the easiest ways to go about paying off your student debt is to set up auto-pay from your bank or credit union. Rather than trying to remember to make your payment every month, it can be automatically drafted from your account instead.
- Follow up on the process. Even if you set up auto-pay, you need to regularly monitor the status of your student loan. Make sure that your payments are being collected and applied properly to your loan. While auto-pay helps to streamline the process, you’re still responsible for ensuring that the transfer happens and that sufficient funds are available every month.
Tips on paying off a student loan
When it comes to paying off your student debt, there are plenty of tips and tricks to help you navigate the process properly.
- Prepay when you can. Most student loans come with no prepayment penalties. What this means is that if you’re able to pay more each month, you can save significantly on the overall cost of your loan and pay it off sooner.
- Contact your provider if you’re having trouble paying. The time to contact your lender when you’re having doubts about keeping up with payments is as soon as possible. There are systems for both federal and private student loans that can help you keep up when your financial situation changes. However, you’ll only know about these programs if you ask.
- Consider refinancing. If interest rates change or your financial situation gets better, you may be able to refinance your student loans at a better rate. You should periodically look into interest rates and what you might be able to save if you were to refinance. This is especially true if your student loans currently carry a high interest rate.
Types of loans with 6-month grace periods:
- Direct subsidized student loans
- Direct unsubsidized student loans
- Federal family education loans
- Some private student loans
- Perkins loans (9-month grace period)
Lenders understand that you may need some time to find a job, get settled, and move into a financial position after graduation where you can start repaying your loans. Many student loans offer what is known as a grace period. This is the period after your education ends that you can use to get situated and won’t owe any payments on your loans.
Grace periods may change based on active duty military service, heading back to school before half of your grace period has passed or consolidating your loans. Consult your lender if you have specific questions about these unique situations.
How can I refinance my student loan?
Refinancing your student loans may be an option if you’re looking to take advantage of lowered interest rates or have an improved financial picture. Additionally, some borrowers may look to refinance to lower their overall payments.
If you have federal student loans, you should start by looking into the other repayment plans first. If you choose to refinance, you’ll lose the ability to move to these other plans and the protections afforded only to federal student loans.
Private student loan borrowers can approach other lenders in the industry to see what they might be able to offer when refinancing your existing loan. Refinancing is the process of taking out a second loan to pay off your first loan. After refinancing you’re only bound to the terms of your new loan, as you’ve fully paid off the initial loan. In some situations, you may be able to refinance with your current student loan lender.