The best strategy to paying off your student debt is to start early. Even if your loan is unsubsidized - meaning you’re not required to make interest payments until after graduation - it’s financially savvy to start making small payments while enrolled in school.
As you continue to make payments while you’re in school, when you graduate, the principal — or the original balance — will be much lower. This means you will end up paying much less in the end.
From there, review the interest rate of your student loans and consider refinancing your loan. Refinancing your loan means taking on a new loan with a private lender to repay your existing loans. This gives you the opportunity to secure a lower interest rate.
Why is this a good idea?
There are a few key benefits to refinancing student loans. Most importantly, with a lower interest rate, you can make a lower monthly payment, freeing up cash for other expenses. This will also enable you to pay off your loan faster, saving you money in interest payments. Finally, a lower monthly payment decreases your debt-to-income ratio, which can make it easier to qualify for future financial decisions, like a mortgage.
The refinancing option is usually only applicable to private student loans. There may be refinance options offered through your credit union, bank, or even institutions like SoFi and Gradifi. Confirm the details of the refinance loan and review it against your budget to ensure these new monthly payments are doable, given everything else you are working on.
Now, federal student loans may be eligible for forgiveness through a program. For example, public service, non-profit, or a teacher loan forgiveness programs forgive the debt owed by professionals for choosing to pursue a certain profession.
Finally, stay the course. In some cases, people pay off their loans in five years; while in other cases, it can take two decades to pay off student loans. It can be a balancing act of paying off debt, while continuing to save for your financial future so having an expert, like a financial planner, to help you create the right game plan to tackle all your financial goals can be extremely helpful.
To learn more about student loans and financial wellness, checkout more resources on Learn.
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