Like any debt, it's always smart to pay more than the minimum payment each month. You'll pay off your loan faster, and in the long term, you'll pay less in interest.
Let's look at a few ways to better manage your monthly payments and get your student loan debt behind you fast.
Student loans from the federal government are automatically assigned a 10-year repayment plan. Most private loans and income-tied government programs offer terms that extend to 20 or 25 years. So the government's standard repayment plan may be one of the best deals around for paying student loans fast.
It may feel obvious, and if you have private loans, this path won't apply. But stop and check out how your federal loan measures up.
Refinancing replaces your current student loan with a new loan at a lower interest rate. If you have multiple student loans, you can consolidate them into one new loan.
With a lower interest rate, you'll save money over the long term, and if you're opting for consolidation, your monthly payments to multiple lenders will get streamlined to one.
But refinancing isn't always the best choice. For example, if you refinance a federal student loan, your new loan won't be eligible for federal loan forgiveness programs or special repayment programs tied to your income.
However, if you're refinancing private student loans, those loans aren't eligible for government relief. So a new loan with a lower interest rate might make good sense.
Check your credit score before refinancing. Private lenders will look for a healthy credit report, proof of current employment and a strong debt-to-income ratio. And if you're applying for Public Service Loan Forgiveness or other government financial aid, it's probably best to skip refinancing.
If student loan refinancing makes sense, look for a loan with a shorter term. Your monthly payment will probably go up, but you'll pay less in interest and pay off the debt faster.
Stay on track with your student loans with Bright.
Private student loans are always accruing interest, even when payments aren't typically due, like during grace periods, deferments and forbearance periods. When your repayments start up, that accrued interest is added to your principal balance, on top of the original loan amount, where it adds to the interest you're charged.
But you don't have to sit idle during a grace period. Some student loan borrowers choose to make interest-only payments - less than they might pay otherwise, but still making progress, lowering their balance with these additional payments and paying off their debt faster overall.
Or consider making a lump-sum interest payment during a postponement period. You'll have a smaller balance and can pay if off faster.
This is an easy fix, one that doesn't require qualifying with new lenders or worrying over eligibility or finding a new loan with new repayment terms. It's also meant to be affordable - not a method that requires new bigger payments.
It's simple: every two weeks, pay half of your payment, instead of making one full payment at the end of the month. At the end of the year, you'll have made an extra payment.
It's not hard, especially with automatic payments, so you're always hitting your due dates and it might be the most magical among your repayment options.
While you're thinking about paying off student debts, take a look at how you’re managing your credit card debt. The sooner you pay off your cards, the more you can dedicate to student loan debt.
Bright helps get you debt-free by managing your card payments for you. With a personal Bright Plan, we’ll use our patented MoneyScience™ to study your finances, learn about your debt and make smart payments, always on time, optimized to save you money and to get you debt-free fast.
With a postgraduate degree in commerce from The University of Sydney, Pranay has his finger on the pulse of the finance industry. Breaking down complex financial concepts is his forte.