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9 Ways To Reduce Your Student Loan Debt

Posted by in student loan
20
Apr 2020

Education is one of the most important tools you can acquire to help build a solid foundation for your future. Investing time and energy in your education can be laborious, but ultimately fruitful. Unfortunately, the costs associated with pursuing higher education can be very high, usually requiring students to take a loan and eventually pay it back when they are financially able to do so. This being said, paying off student loans can be very problematic for new graduates, and is the second-largest type of consumer debt after mortgages.

Ways to decrease student loan debts

With the economic situation creating difficulties for young and fresh graduates to find jobs, paying off their student loans cannot usually be a top priority. Nonetheless, if you are a newly graduated student, still in school, or have begun to establish yourself into a career, it’s always a good time to focus on reducing and paying off any remaining student loans you may have. Luckily, there are some ways to help reduce the burden of your student loans through several methods, such as better loan terms, lower monthly payments, or shorter repayment periods. If you have a student loan that you would like to reduce significantly, we’ll share 9 ways you can do just that.

  1. Continue budgeting and prioritize your loan

    • College life may be a thing of the past for you, but that doesn’t mean you have to leave the college lifestyle behind, at least not right away. It’s not always easy living on the bare minimum and focusing on studying and saving over the course of your college years. So it’s tempting to stop saving and spend a little more freely once you’ve graduated and found a job. However, if there are pending student loans in the mix, it may not be time to let your finances go out of check just yet. Try to continue living frugally by sharing expenses with roommates, using public transport, and cooking at home, for example, to help save as much of your money as possible. The best way to do this is to create a realistic budget for every month and stick to it. The more money you put towards paying off your student loans, the faster you will be debt-free and finally able to take on some of your new financial goals and enjoy the money you earn.

  2. Employer assistance

    • Many governments and private employers offer assistance with student loan repayment or tuition reimbursement programs. If you’re looking for a new job, it’s always a good idea to see the kinds of benefits your potential employer is offering or inquire about tuition assistance programs if you are already employed.

  3. Start making payments while in school

    • Many student loans do not expect you to begin making payments until after you have graduated, nor does your loan accumulate interest while you are still in school. Start putting aside money to pay down the loan if you can while still a student then start payments on the loan as soon as you can. If you can bring down your principal amount significantly before the grace period ends, you can spare yourself from paying a large amount of interest.

  4. Pay more than the minimum

    • Every debt that you have usually breaks down your payments and provides you with the minimum required payment to be made per month. If you stick to the minimum, you will eventually be able to pay off the debt, with a significant amount of added interest, over a relatively long period depending on the size of the debt. You can, however, decrease the amount of interest being added to your principal amount by making larger payments and aggressively paying down your loan every month. This will quickly pay down your principal amount, decreasing your balance, and get you out of debt faster.

    • In order to come up with extra money to pay down your student loan, you could try picking up another job or extra shifts, offer lessons or tutoring services or rent out a room in your home. Any extra money generated by an additional job or business can be funnelled directly towards paying off your student loan.

  5. Apply for public service loan forgiveness

    • Public service loan forgiveness is designed to forgive student loans after a certain number of payments for eligible individuals. In order to qualify for public service loan forgiveness, you must be employed full-time by a government or a not-for-profit organization that qualifies. This plan allows you to be forgiven of your debt after about 120 qualifying payments; however, there are restrictions, so it’s important to understand everything that is required of you if you are eligible for this option.

  6. Refinance your student loan

    • Refinancing your student loan can be done through a private lender so you can get a better interest rate on your loan. Over time, the lower interest rate can help you save a significant amount of money. However, it’s important to keep in mind that if you choose to refinance through a private lender, you forfeit the federal repayment options such as public service loan forgiveness or income-based repayment. If you’re confident that you will not be losing your job in the foreseeable future, then refinancing could be a good option for you.

  7. Consolidate your student loans

    • If you have multiple federal student loans, you may be eligible for consolidation. Consolidation is a process that takes multiple student loans and combines them into one loan, with an interest rate that is a weighted average of all of the interest rates. This means that although you won’t be saving money on interest, you will be simplifying things for yourself by combining all of your debts into one. You can also adjust your repayment period to whatever suits your financial situation, which will ultimately determine how much your monthly payments and overall interest payment will be down the road.

  8. Readjust your repayment plan

    • The repayment plan you choose should be best suited to your financial and employment status. A number of different repayment plans exist, including income-based repayment (IBR), pay as you earn (PAYE), revised pay as you earn (REPAYE), and income-contingent repayment (ICR). These plans are designed to help you adjust your payment amount and the repayment period based on your income.

  9. Apply for loan deferment or forbearance

    • If your financial situation doesn’t allow for student loan payments at present, loan deferments and forbearance allows you to pause or reduce your monthly payments temporarily. Deferments stop interest from accumulating, while loans in forbearance do not. There are, however, strict requirements to be considered eligible for loan deferment or forbearance.

As you walk across the stage at graduation, brimming with happiness, your mind may jump to the jobs and opportunities ahead of you. It’s tempting to think that the days of saving and skipping some purchases are over for you. Unfortunately, a significant roadblock in these plans is student loans. Student loans are no easy endeavour to overcome, but they should be prioritized as a smart financial decision for your future. Using one or more of the tips outlined above is a great way to start chipping away at and speeding up your student loan repayment.

Our team at Kevin Thatcher and Associates understand how difficult debt can be, which is why we can provide you the advice and guidance you need to ensure that your debts, whatever they may be, do not become overwhelming and unmanageable. Call Kevin Thatcher and Associates today at 1-866-702-9801 to book your free consultation, or visit our website here to learn more about our services.

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