According to the Institute for College Access, around 5 percent of college students used private student loans in the 2015-2016 academic year.
While it’s wise to exhaust federal loans first before taking out private loans, private loans are an affordable way to fund the rest of your expenses once you’ve exhausted your eligibility for Department of Education funding.
If you’re one of the millions of students who borrow for school from a private lender, smart plans to manage your loans can keep costs low so that paying off debt isn’t as much of a burden as a postgraduate student. Here are a few helpful tips.
1. Compare personal student loan rates
The lower the interest rate on your personal student loan, the lower your monthly payment and overall repayment cost. If you’re planning on taking out new student loans, visit Credible to view an interest rate table that makes it easy to compare fixed and variable interest rates from several different private lenders. So you can easily see which lenders offer the cheapest loans.
8 BEST PERSONAL STUDENT LOANS IN 2020
You can also compare student loan refinance rates to see if you can reduce the cost of your existing debt. You can often get a better rate after graduation if you earn income. This can make repayment much easier and more affordable.
Credible can help you explore borrowing options, whether you’re borrowing more to complete your program or looking to refinance so repayment isn’t as much of a challenge. Check out their resources today to get on top of your education debt.
2. Know your student loan balance
When you’re focused on completing your academic program, it’s easy to lose track of all your borrowing (especially if you’re taking out multiple different loans from different lenders). Unfortunately, you can quickly build up a huge bankroll if you don’t keep an eye on the big picture.
To make sure that doesn’t happen, always keep a running list of what you’re borrowing, what your interest rate is, and who your lenders are. You can use a simple spreadsheet to do this, but there are also apps that you can use to link your accounts. The apps are also updated in real time.
5 THINGS YOU CAN USE STUDENT LOANS FOR (BEYOND TEACHING)
When monitoring your loan amount, remember to only borrow for essentials, because the higher your loan balance, the more interest you pay and the harder it will be to get out of debt after closing.
3. Strive to cover interest costs while you’re in school
Directly subsidized federal government loans provide subsidized interest rates during school hours and during deferral. No other student loan offers this benefit. That means, for other federal loans and for private student loans, your interest accrues from the time you borrow.
Most private lenders will give you a choice of school repayment options, including small monthly lump sum payments, just the interest, or a full deferral of payments. If you opt for a small monthly flat rate or pay nothing at all, the interest will unfortunately accrue over the entire period of your studies. You will end up with a much larger loan balance that is much more expensive to repay.
WHAT IS THE 2+2 STUDENT LOAN DEBT REDUCTION PROGRAM?
If you want to avoid growing your debt beyond the loan amount, aim to pay interest on your personal loans while you’re still in school. This could be a financial emergency, but it will save you a lot in the long run if you can manage it.
4. Make a plan and start saving
You probably don’t want to wait until you graduate to think about how to tackle your student loan debt. Instead, keep an eye on what your payments will be after graduation, start working on a budget that prioritizes payment, and save as much money as you can during school to make those payments. You can use an online student loan calculator to work out the cost of your debt so you know exactly what you’re dealing with when making your financial plans.
HOW STUDENT LOANS CAN AFFECT YOUR CREDIT IMPACT
By considering these costs before you graduate and find work, you’ll be ready to pay your lender as soon as possible after you leave school.