Paying back your student loans can be intimidating. Variable interest rates change with the market. In exchange for the student loan payment, you might offer incentives such as a promise to stay at the job for a specific period of time or agree to relocate to a branch office. The main cause of all this postgraduate stress? The faster you pay these down, the less you have to worry about them. How to make money:
1. Have a Positive Mental Attitude
Dec 20, · Make Lemonade’s student loan prepayment calculator can show you how much money you can save by paying off your student loans faster each month by paying more than the monthly minimum. For example, let's assume you have $, of student loan debt at a 7% interest rate with a standard year repayment term. Refinancing your loans is one of the best moves out there for paying off student loans faster. The goal of refinancing is to decrease interest rates, meaning more of your payments go toward paying down your student loans. Oct 12, · If she had taken the standard 10 years to repay her student loans, she would have paid more than $7, in interest alone over the life of the loan. Instead, she ended up paying about $3, in interest. Related: What you need to know about the FAFSA. Paying down the principal of your loans faster lowers the amount in interest .
Extra payments? Make them the right way
But Patel is different. During her sophomore year, she started putting whatever she could toward her student loans every few weeks. I was going to be screwed by the interest if I didn't start paying," Patel said.
The extra money came from part-time jobs she held during the school year and over the summer. She admits the small payments felt huge at the time, and sometimes took up as much as half of her paychecks. Paying down the principal of your loans faster lowers the amount in interest you'll pay over time, said Phil DeGisi, the Chief Marketing Officer at the online student loan refinance company CommonBond. Those tiny payments -- however small -- really do add up," Patel said.
Don't be fooled by student debt relief scams. Here parents also borrowed loans to cover the rest of her tuition. When it comes to that kind of debt, it's helpful to find as many ways as possible to pay back your loans faster. Here are four tips:. Pay down the principal early, rather than the interest. If you're making pre-payments while in school, make sure they're going to the the principal amount, rather than the interest. This might happen automatically, but it's best to call your loan servicer to make sure.
Know which loans you should make prepayments on. If you have federal student loans, you're allowed to make pre-payments while in school. But if you have private loans, there's a chance you could be hit with a fee for making payments early.
Call your loan servicer to find out. There are two different types of federal student loans: If you're going to make payments while still in school, choose to pay down the unsubsidized loan so that less interest accrues overtime. When Patel first graduated, her student loan payments were very high compared to her income.
She moved home, commuting four hours a day. There are a handful of banks and online lenders that will refinance both federal and private student loans. If eligible, your new interest rate will be based on your debt-to-income ratio and credit score. Once Patel paid off her own debt and was earning a bigger income, she was able to qualify for a lower interest rate by refinancing with CommonBond. It lowered the interest rate on the PLUS loans to 3. If you refinance a federal loan with a private, you might be giving up some protections -- like being able to apply for deferment or an income-based repayment plan in the event your finances take a hit in the future.
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Getting started Goals Setting financial goals. Banking Opening a bank account. The best way to pay off student loans fast is to pay more than the minimum each month. These strategies can help you get there:. Make them the right way 2. Good credit and steady job? The government automatically puts federal student loans on a year repayment timeline, unless you choose differently. If you have a private loan, your repayment term could be shorter or longer.
You can make an additional payment at any point in the month, or you can make one larger payment on the due date. If you qualify, a lender will replace multiple student loans with a single private loan at a lower interest rate. Best student loan refinance lenders Federal loans offer income-driven repayment plans , which can extend the payoff timeline to 20 or 25 years.
You can also consolidate student loans , which stretches repayment to a maximum of 30 years, depending on your balance. Or make a lump-sum interest payment before your grace or deferment period ends. How much will deferment or forbearance cost you? This simple strategy is a way to trick yourself into paying extra on debt: Pay half of your payment every two weeks instead of making one full payment monthly.