When a student graduates, their federal student loan goes into repayment. But, you can get a six-month grace period before you start making payments. That is, if you have a direct subsidized or direct unsubsidized government loan. That grace period also applies if you have a federal family education loan.
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For those with a Perkins loan, they get a nine-month grace period. Such students go into repayment immediately after the loan is fully disbursed. Graduate borrowers get placed on an automatic deferment while still in school. This also applies six months after leaving school or dropping below half-time enrollment.
If your loan enters repayment, you get placed on a standard repayment debt payoff planner. Note that you’ll be at liberty to request a different repayment plan at any time.
How to Fix Your Student Loan Debt
It’s important to start planning on how you’ll repay your student loan even while still in school. Research and find out about selecting repayment plans. Because it helps you to know if your payments are manageable. Let’s now find out how we can fix that student loan debt.
1. Use a Budget Tracker
Many people consider budgeting a monotonous and tedious task. But it can help you understand your spending habits. A budgeting tracker makes the process easier if you find one that meets your needs.
Tracking your expenses is one of the key factors in budget management. It helps you know how much you have spent so that you can find ways of reducing your expenses.
There are several options available to track your spending. Chunk finance enables you to closely track your spending-to-income ratio with their tools. This way, you can see your savings contribution each month. You get enabled to track your assets, including savings with the net worth calculator.
They also enable you to stay on top of your finances and use the built-up savings to reduce your debts.
2. Consolidate Student Loans
If you receive student loans for more than a semester, you could be having several loan servicers. This will need multiple paychecks at different times of the month. This might be at amounts that you can’t afford.
The best thing to do would be to apply for a direct consolidation loan. A DCL will enable you to roll several of your student loans into one new loan. Once the loans have been consolidated, you’ll only be required to make a single payment.
The limitation of this rule is that you can’t use the pay-as-you-earn repayment plan. That’s only if you have a federal family education loan.
3. Use the Debt Avalanche Method
The debt avalanche method of loan repayment helps you to minimize the amount of interest you pay. This technique can help you clear your student loan and live debt-free.
Debt avalanche targets debts with the highest interest rate. This technique will help you save time and interest during your debt payoff journey. To make the avalanche method debt repayment plan work, list your students’ loans in order of interest rate.
Make minimum payments on all your loans by focusing on one balance at a time. Note that you have to stay current on all your loans to avoid fees. Pay an extra amount on the debt with the highest rate with any additional cash you get.
This will reduce the amount you owe at that high rate. Build momentum by crossing each loan off your list after clearing it. You can then redirect the amount you were paying on the cleared loan to one with the next highest rate. This is how to pay off your debt fast, down to one with the lowest interest rate.
4. Understand the Details About Each Loan
To pay down your student loan debt, you need to understand how much you owe. If you’re unsure of how many loans you have, check with the National student loan data system.
For the private student loan, check your credit reports to ensure you know all your lenders. Do this before you begin paying off credit card debt. Remember that student loans are reported on credit reports. This is meant to ensure that you pay your loan bills at the right time. That way, you can avoid hurting your credit card score.
While gathering information about your debt, make a list to track the following:
- The type of loan, whether private or federal
- Whether fixed-rate or variable-rate
- The balance
- Interest rates
- Term length
- The grace period
- Total due
Having the above details makes it easy to figure out what loans will cost you more. Then you can figure out a strategy on how to pay off credit card debt fast.
5. Consider the Type of Loans
Strategies to pay off multiple student loans can differ by borrowers. But it might do you good to tackle private student loans. That’s because federal loans have more borrower benefits with options like deferments.
They also have repayment plans based on income. They are unlike private lenders that are less flexible. Private student loans have higher interest rates. You take note of such details while creating your repayment plan. You’ll manage your path towards repayment if you understand all the details of various loans.
6. Make Extra Payments in the Right Manner
You’ll never face any penalty for paying student loans early or more than the minimum amount. But there’s a limitation with prepayments. That is, that servicers that collect your bill, can include the extra amount to next month’s payment. This advances your due date.
However, it doesn’t help if you pay off the student loans faster. Rather, instruct your servicer to apply overpayments to your current balance. They can then keep next month’s due date as planned.
You can make extra payments at any time of the month. You can also choose to make a lump-sum student loan payment on the due date. Any of the two methods will save you money.
7. Choose a Career in Public Service
Working for a government agency will be helpful if you have loan management concerns. With this career path, you can positively impact people’s lives. But most importantly for you, you could qualify for public service loan forgiveness.
Through the program, your federal student loan could be forgiven. But, you’ll need to have worked for at least ten years at a qualifying organization. You’ll also need to have made 120 qualifying payments on your loans. The remaining balance can be discharged tax-free.
If your career field is not part of public service, you can use other student loan forgiveness programs that you qualify for.
Final Take Away
The best way to clear your student loan is to pay more than the minimum. The more you pay towards the debt, the less interest you’ll owe and the faster the balance will disappear.