Tips for Shearing Student Debt – During Repayment

When I made the decision to go to college, I knew it was going to be an expensive road. But I never could have imagined just how expensive. After four years of school and four separate loans, I racked up a rough total of $30,000 of student debt.

By comparison to others, I got off easy. Some graduates have loan principles larger than their mortgages. Collectively, Americans owe $1.3 trillion (that’s trillion, with a T) in student loans, and that figure is growing at about $3,000 every second. And with average interest rates between 7-15%, that’s a lot of money to lose, and a lot of time to spend losing it.

Luckily, there are steps you can take to ease the burden, even after you’ve started paying the bills. Consider these useful tips, no matter where you are on the road to repayment:

1. Avoid the Auto-Debit Scam

Most loan providers allow you to enroll in auto-debit, which takes your payment (usually minimum payments) out of your checking account every month. This is great for people who want to “set it and forget it,” if they’re not good at remembering to do it themselves. Since missing a payment can affect your credit score and have all sorts of consequences, auto-debit can be helpful.

With that in mind, I signed up for it as soon as I could, for all of my loans. But I was surprised by what ended up happening.

One of my loans has $8,000 left in principal, and a 7.5% interest rate. Auto debit was taking out roughly $46 every month. I recently checked on it to see how it was doing, and found out; interest was being added faster than the payments could cover. So every single payment thus far had gone to the interest; the principle hadn’t gone down at all.

Making more-than-minimum payments is necessary for your long-term financial health. If you would still rather enroll in auto-debit, talk to your provider and see if you can increase the amount that is auto-paid every month (double the minimum, or even triple it if you can afford that). You can save thousands of dollars over the life of your loans if you do this.

2. Transfer it away

Believe it or not, if you have good credit, it’s actually possible to get a credit card with a lower rate of interest than some of your student loans. You cannot do balance transfers with federal loans unless you default on them, though. Private loans can vary, depending on the lender.

If your credit isn’t so great yet, some credit cards have 0% APR for the first 12-18 months on balance transfers. After that though, the interest rates could be even higher than what they were before.

If you feel like you can pay off your entire loan before the 0% balance transfer period runs out, it’s a good way to save some money. It’s definitely a risk through; you never know what curve balls life with throw at you. You may have the income to do it at first, but that can easily change, forcing you to pay the penalty if your interest rate rises.

3. Public Service, or Relocation

Some underpopulated areas of the country (like Kansas) are offering student loan assistance to new graduates who relocate there. Some public service professions, like teaching in a low-income school, also offer assistance or forgiveness programs. These options are worth considering, but remember: they require a lot of commitment and life-changes. They’re viable options if you have no other choice, but don’t become so focused on them that you miss the opportunity to earn a higher salary instead, and thus pay off your debt sooner.

4. Other assistance programs

With every new dollar owed in student debt, public scrutiny of the crisis grows. As a response, more and more banks (such as Discover or Wells Fargo) are offering assistance programs. These programs can reduce interest rates, extending repayment terms, or even some forgiveness programs for private loans. Keep a lookout for programs such as these.

Remember that mistakes can go onto your credit score, and follow you for 7-10 years. Missed payments, defaults, or other bad marks can make it harder to get a house, a car, a job, and many other important things. As a response, it’s best to keep your expenses as low as possible until the debt is paid off. Live with your parents if you have to. Buy only used cars. Cut unnecessary expenses.  You can visit the rest of our site to see more tips on how to do this.

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