Borrowing and repaying student loans is tricky as well as costly. However, you can cut down the repayment amount if you handle money wisely. Follow these student hacks to save more and stress less over a student loan:
1. Opt for Federal Student Loans First:
If you MUST borrow money, consider applying for federal student loans because they are easy to qualify, less costly, and have various repayment options. Moreover, you can get loan forbearance or deferment as a part of their protection programs. If you lose a job or continue your studies, you need not worry about loan repayment as you can defer it.
In the case of private student loans, you have fewer repayment options. You also need a cosigner to get your loan approved. Still, there are ways to qualify for a loan without a cosigner. If you are stuck there, have a look at details about options that you have to get a private student loan without a cosigner.
2. Pay During Your School Years:
Deferring repayments will only increase your burden due to the accruing interest rate on the principal amount. Tackle the interest on unsubsidized loan first during school years to prevent it from increasing heavily. In the case of private loans, pay the principal amount as soon as possible to stop the amount from accruing through time.
Another tip is to repay the amount twice a month. As the interest rate increases on daily basis, you can save some money by making payments in halves every month. Moreover, it will help you cut down the unnecessary expenses by paying for loan repayment as soon as you get the money.
3. Sign Up for Auto-Debit:
You can get a reduction in the interest rate by 0.25% to 0.50% for signing up for auto-debit. Auto-debit refers to automatic deduction of loan payment from your bank account.
4. Keep a Good Eye on Your Loans:
During the grace periods, most students forget about their loan repayments altogether. It is important to preplan the method of repaying all the remaining student loans. Get all the details at one place from phone numbers, addresses, and websites to loan ID number, principal amount, interest rate, and monthly repayment amount. Beware of their due dates to keep track of all the loan payments.
5. Take Advantage of Interest Deduction:
Get the interest deduction on federal and private student loans based on the interest paid on total student loans during the year. You can get an interest deduction of up to $2,500.
6. Refinance Your Student Loans:
If the accruing interest rates are too much to handle, you can save money by consolidating all your student loans into one with a low-interest rate. This hack will help you save some extra amount for later use.
7. Always Pay More than the Minimum Loan Amount:
Paying extra amount than the minimum repayment limit will help you save money from heaping up interest rates. When you repay most of your principal amount, then it costs you less interest on the remaining amount.
About the Author:
Taylor Hill works for a financial technology company Stilt located in San Francisco which is revolutionizing the way individuals with limited or zero credit history get loans in the USA.