Here’s how to make the most of each payment
No question, paying for college can be daunting. If you are like the other almost 44 million Americans who face paying back student loans, the debt can seem overwhelming. But since last summer, more than 4 million borrowers have been getting help from the Biden administration’s SAVE (Saving on a Valuable Education) plan. Like other income-driven repayment plans, SAVE calculates the amount you owe based on income and family size, and this program comes with other benefits. To find out more about SAVE and apply, visit studentaid.gov.
SAVE is just one of the federal loan forgiveness opportunities. Other programs, like Public Service Loan Forgiveness (PSLF), are available for teachers, military service members, AmeriCorps participants, some public servants, and more. If you think you might be eligible, research your status at studentaid.gov/articles/student-loan-forgiveness.
Whether or not you qualify for loan forgiveness or a special repayment program, it’s smart to create a plan to manage your loans efficiently and diminish that remaining debt. Be sure to take advantage of tactics like these:
Consolidate. If you have multiple federal loans, you may be able to consolidate them into a single loan with a one monthly payment and a fixed interest rate. Private loans can’t be consolidated with federal loans, but they can be refinanced (where one loan is replaced with another), which can make sense if you can lock in a lower interest rate.
Ticktock. Interest continues to build even when payments are delayed, so pay on time and keep up with your payments during any grace periods. Getting a jump-start and making payments while you are still in school— if you possibly can — will put you ahead of the game.
Discounts Count. If your lender offers a discount for making monthly payments automatically from your bank account (the auto-debit option), be sure to consider it. Federal loans offer an auto-pay discount of 0.25 percent on the interest rate, which adds up.
Go Big. Make the largest payment you can to diminish the principal (the amount you are paying interest on). A habit of going beyond the minimum payment, even if it’s a small amount, will get you out of debt faster.
Melt Debt. A proven fast way to pay off debt is the snowball method, where you focus on paying off the smallest debt first while making minimum payments on any other loans. Once you’ve paid off the smallest loan — you’ll feel great about that — move on to the next smallest, and so forth. Online snowball debt calculators will show you the light at the end of the tunnel — your debt-free date.
Use Your Tax Refund. You took a tax deduction for paying student loan interest, now turn the refund around to help pay off the principal.
Ask the Boss. Many workplaces offer repayment assistance to their employees with student loans. Be sure to check with your employer.