How to Pay Off Debt Fast Series: Paying Off Student Loan Debt
Next up in our series on how to pay off debt fast is something that most of us who went to college are saddled with: student loan debt. Most college students end up with at least one student loan that needs to be repaid after graduation. However, it can take a little bit of planning in order to figure out the best way to pay off student loan debt as quickly and easily as possible, especially if you are not making a lot of money right after graduation.
The first step to paying off student loans is figuring out exactly what types of loans you have, and how much you owe on each of them. Many students do not actually know the details of the various types of financial aid they received while in school, and only start to realize exactly what needs to be repaid after they graduate and the loans start to become due. Start by making a list of every loan, the amount due, and any other details you know about the loan. If you do not have a list, contact the financial aid office of your school, as they should be able to help you or put you in contact with somebody who can. Of course, you do not need to list any money you received because of a grant, as those do not need to be repaid.
There are generally several repayment options available for student loan repayment. Standard payment plans often offer the best interest rates, but because this is the quickest repayment method, monthly payments are also higher. If you can manage the monthly payments, this is a good option since you will pay the loan off relatively quickly and you will ultimately pay less since the interest will be lower. Graduated payment plans will increase the amounts of the monthly payments over time, with the expectation that your income will also continue to increase as you gain work experience. This is one of the most common repayment plans. Income-based payments are good for those who work in seasonal or commission-based jobs. Long-term payment plans offer the lowest monthly payments, but also the highest interest rate, and can be quite costly over the long term. If the later works for you in the short term, look into the option of switching plans if your income increases and you want to pay off your loan more quickly down the line.
If you have more than one student loan, you could also choose to consolidate them. While this can lower your monthly payments, you will end up paying more in interest by the time you pay your entire loan amount off. One thing to remember when consolidating student loans is that federal and private loans cannot be combined when consolidating. Although the main benefit of consolidating federal loans is to create one monthly payment, many students find advantages in consolidating private loans. Before consolidating, make sure you check with the lender concerning origination fees, prepayment penalties, interest rates, and any other terms of the loan consolidation. Do not sign any paperwork until you understand all the terms completely, and avoid consolidation loans, which include prepayment penalties, as this will prohibit you from paying your loan off early without being penalized.
How to Pay Off Debt Fast: Paying Off Student Loan Debt © 2010 SpareDollars.com
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