Student loans are something that affects the majority of people who attend higher education. To put things into perspective, about $4,000 in student debt is accrued every single second. Seventy-two percent of the class of 2017 owed an average of more than $37,000 for four years or longer of higher education.
These numbers may seem scary, but that’s why, at Central Willamette Credit Union, we’re here to help. We want to make student loans in Oregon less scary for you. We have teamed up with Sallie Mae to offer you student loans that come with great repayment options and competitive rates. For instance, we allow you to borrow up to 100 percent of the cost of attendance, as well as offer the option of both variable and fixed interest rates. As you can see, we want to help you better understand the financials and provide you with tips for managing your student loans.
Now that you have your student loan, though, how do you go about managing it? Here are some tips to help you pay off that student loan sooner rather than later.
Take Advantage of Your Grace Periods
There is a plus when it comes to student loans—you don’t need to start paying them off immediately upon graduation. A grace period is defined as the amount of time after you graduate from school until you have to start paying your student loans back to whomever you borrowed from. These time periods vary depending on the type of loan and the lender, so be sure to know what your specific grace period is for your loans. For Stafford loans, you have a six-month grace period, but for Perkins loans, your grace period is nine months. In terms of private student loans, those vary. You don’t want to miss your first payment and be penalized!
Additionally, take further advantage of this grace period where you don’t have to pay by using this time to earn and save more money. By doing this, you’ll be better prepared for when you must make that first payment. Remember, after that first payment is made, they’ll keep coming, which is why it’s important to save as much as you can prior to the payments beginning.
Pay Off Loans with the Highest Interest Rate First
As different loans have different grace periods, they may also have different interest rates as well. It’s financially savvy of you to pay the loans with the highest interest rate first and save those with lower interest rates for later. This is because if you hold off on repaying the loans with the higher interest rates, that interest will accrue to much higher amounts owed, as compared to loans with lower interest rates.
Furthermore, if you have budgeted a higher amount to pay off your loans, once that high-interest loan is paid off, you know for certain that you’ll have a surplus of money budgeted for your next loan payment. Whereas if you pay off the lower interest ones first, you may forget to take into account that you’ll need to budget more money for loans in the future.
Many times, private loans have a higher interest rate than federal loans. Be sure to double-check your specific loans, but it’s usually smart to pay off the private loans first.
Pay More Whenever You Can
Is it your birthday month? Ask for money that you can then put toward your student loans. Receive a bonus at work? Put it directly toward your student loans. If you’re able to pay extra principal whenever you can, you’ll able to reduce it faster, which in turn means you’ll have to pay less interest in the long run.
If you have come into some extra money you can put toward your principal, be sure to reach out to your lender to detail the exact amount that you will be increasing your payment by for that specific month (and that it will only be for that month).
Look Into Whether Consolidation Is an Option
This type of loan combines multiple loans into one single loan. This will allow you to make one monthly payment rather than multiple ones. Additionally, there’s a single interest rate on this consolidated loan, rather than potentially having various interest rates that you need to keep track of. A lot of times, consolidating your loans also lengthens your payoff period. Some people prefer this, as it gives them more time to pay off their debt. However, it does mean that there are more interest payments being made too.
Not everyone chooses this option, as by consolidating, you’ll lose all of the original repayment options, as well as the borrowing benefits. For example, many folks with federal loans prefer not to consolidate because they may lose benefits such as loan forgiveness programs and unemployment deferments.
Loan Forgiveness
As mentioned above, there are circumstances in which some (or all) of your loans can be forgiven. For instance, if your school closed before you were able to graduate with a degree, you could be eligible.
Additionally, if you work in specific fields, there are various programs that partake in loan forgiveness. Public Service Loan Forgiveness is a federal program that will forgive any remaining student debt after 10 years of consecutive payments for those working in the nonprofit sector, government, or any other public service jobs. Nurses, teachers, AmeriCorps, and Peace Corps volunteers also have federal loan forgives options available to them. Be sure to do your research to see if there is one for the field you’re working in.
If you have student loans, you’re most definitely not alone. Paying off these loans isn’t fun, but they don’t have to be scary. By following the above tips, you can take better control of your loans and not let them get away from you. Remember, the longer it takes for you to pay them off, the more interest you will have to pay. Keep this in mind when making payments, and when you come into some extra money. The faster you can pay them off, the more relief you will feed.
We’re proud to have specialists in our office who focus solely on student loans in Oregon and who can help you find the right loan and the right rate for you. Plus, they can give you more personalized tips than just the above.