Another year, another year with student loan debt. It does not have to be that way if you have dedication, hard work, and focus on paying off your debt. There are five steps that are sure to help you pay your student debt as quickly as possible. However, these tips will only work if you make a financial plan and are persist. The latest financial studies have proven that creating a financial plan or budget has the highest success rate compared to those who do not. The average Canadian student has mid to high $20,000 in student debt; wouldn’t it be amazing if you could pay that debt quicker than expected? If so, this is the article for you! Loan Away has referenced our source below.
5 Student Loans Resolutions For 2018
The new year is the ideal time for new resolutions.
It’s an opportune time to check your financial life, and create your 2018 student loan game plan.
According to Make Lemonade, there are over 44 million borrowers who collectively owe more than $1.4 trillion in student loans.
Here are five New Year’s resolutions for your student loans.
1. Refinance your student loans
Student loan refinance is often the single best strategy to lower your student loan interest rate, and potentially save thousands of dollars on your student loans.
Student loan refinance allows you to combine your existing federal and private student loans into a new, single student loan with a lower interest rate.
There are multiple private student loan lenders who offer interest rates as low as 2.50% – 3.00%, which is substantially lower than federal student loans and in-school private loan interest rates.
You can choose either fixed or variable rates and loan terms ranging from five to 20 years.
Each lender has its own eligibility requirements and underwriting criteria, which may include your credit profile, minimum income, debt-to-income and monthly free cash flow.
To maximize your chances of being approved to refinance student loans, you should apply simultaneously to multiple lenders.
Since interest rates are expected to rise again this year, now is an opportune time to refinance student loans to lock in a lower interest rate.
Recommended Calculator: Student Loan Refinancing Calculator
2. Consolidate your federal student loans
Federal student loan consolidation enables you to combine your existing federal student loans into a single federal student loan known as a Direct Consolidation Loan.
As its name suggests, federal student loan consolidation does not apply to private student loans. While the federal government does not refinance student loans (only private lenders do), the federal government offers a Direct Consolidation Loan.
Federal student loan consolidation helps you organize all your federal student loans into a single loan with a single monthly payment. You also have access to federal repayment programs and the benefits afforded by federal student loans such as deferral and forbearance.
The downside is that federal student loan consolidation does not lower your interest rate, so it is not a strategy to save money.
With federal student loan consolidation, your resulting interest rate is equal to a weighted average of your current interest rates on federal student loans, rounded up to the nearest 1/8%.
Recommended Calculator: Student Loan Consolidation vs. Student Loan Refinancing Calculator
3. Apply for public service student loan forgiveness
While public service student loan forgiveness may not continue as a federal program (in its current form or at all), Public Service Loan Forgiveness and Teacher Student Loan Forgiveness are still available to qualifying individuals.
Public Service Loan Forgiveness is for student loan borrowers with federal student loans enrolled in a federal repayment plan who are employed full-time in an eligible state, local or federal public service job or 501(c)(3) non-profit job who make 120 eligible on-time payments.
Teacher Student Loan Forgiveness is for full-time teachers with five years of teaching experience in a designated elementary or secondary school or educational service agency that serves students from low income families.
Recommended Calculator: Public Service Loan Forgiveness Calculator
4. Increase your monthly student loan payment
This may sound counter-intuitive, and it may feel challenging to find extra money to increase your monthly payment for student loans.
However, interest is always accruing on your principal balance. So paying any amount more than the monthly minimum — whether it’s $10 or $100 — can reduce the cost of your student loans.
Plus, there is no prepayment penalty for paying off your student loans early.
Recommended Calculator: Student Loan Prepayment Calculator
5. Make a lump-sum student loan payment
Another smart move is to use a portion or all of your annual bonus to make a one-time, lump-sum payment toward the principal balance of your student loans.
Instruct your student loan servicer in writing that you want your lump-sum payment to pay down principal only, rather than applying toward future principal and interest payments.
Reducing your principal balance directly will save you money on interest, and help you pay off your student loans more quickly.
Remeber, the advice given will only be effective if you persist and make the necessary lifestyle changes. Without effort, these tips are meanless. You have to understand what your goals are and how you are going to achieve them. A goal without a plan is a dream. Contact a financial adviser, your bank, or anyone who may be of help for your goal. Debt consolidation is the best option for those that have bad credit or if you want one loan to pay off.
Enjoyed this article? Great! Share it with anyone you know that has student debt & are looking for better alternatives. Loan Away writes an article per day for our clients who want to expand the financial knowledge.
