Many Americans leave college with $20,000 of student loan debt and lenders are eager to have your business. Here is a list of things you can do to pay down your student loan debt faster.
- Things you will want to consider when deciding to consolidate will include:
- The Amount Borrowed – Does the loan cover all of your student loans or just a few? Lenders may want some proof of employment or a demonstration that you are able to may the consolidated student loans back.
- The Annual Interest Rate – Consider if your rate will be fixed for the term of your loan or will be variable rate loan. Evaluate the rate you select with the adjustability of payments: If rates increase will your lender increase your payment amounts as well?
- The Term of Your loan – The longer your loan term, the lower your payments will be. You need to balance repaying your student loans with your other needs such as home ownership.
- Keep your student loans separate from other forms of debt. The Federal Consolidation Loans can only hold student loan debt and rates are lower than on combined student and private debt consolidation loans.
- Be aware that while it may be convenient to consolidate your federal student loans into a single payment, it does not make good financial sense to consolidate loans that have lower interest rates than your consolidated loan. Consolidate the higher rate loans into lower rates loans but avoid the opposite.
Federal Student Loan Debt Consolidations
Accelerate Your Payments
- Whether you have consolidated your student loan debt, extended your term, lowered your interest rate and payments, when you do have more money available consider increasing the amount you pay monthly. If you got a new job that pays 20% more than your last job, increase your monthly payment by 20%! This simple technique should be applied to any loans you have that allow prepayment and is more effective and easier to implement than making periodic lump-sum payments.
- If you can’t do this in the earlier years you will certainly be able to do it later when you are making more money.
Make Your Payments Electronically
- Consider making the payments on your student loan debt electronically. Many lenders offer a 1/4 percent reduction in your loan rate.
- Look around for the best deal and the lowest rate. But make sure you are fully aware of any penalties you may have to pay your current lender if you switch.
Other Things to Consider
Make sure that you take steps track your net worth and establish a budget. As you pay down your debts, you will see the financial impact of your decision and will have a periodic progress report on your financial marks.
You may also want to consider disability insurance and if you have children, life insurance. These types of policies will typically be less expensive when you are younger while the converse ill be true for auto insurance.