5 private student loan tips you should follow in 2020, according to an expert

Private student loans can help pay tuition, but there are a few rules to keep in mind. (one)

Private student loans can help close the tuition payment gap if you have already maximized federal student loan eligibility. Knowing how to manage personal student loans as a new or repeat borrower is important to staying on track with educational debt. These expert tips can help you navigate personal student loan repayments through 2020 and beyond.

1. Start paying interest while still at school

Student loan administrators can grant a grace period while you’re still enrolled in school, meaning you’re not obligated to pay anything on your loans. But it may be wise to at least make payments for the interest.

“If a borrower has the financial flexibility to do so, it’s always a good idea to start paying off your student loans while you’re still in college,” said Kevin Walker, CEO of CollegeFinance.com.

To do that, you can contact your credit servicer and ask how you can make payments at school, Walker said. Even small interest payments can help reduce subsequent repayment. If you’re looking to lower your monthly payments to make paying off your student loans more manageable, you should also consider refinancing (which we’ll get to later). Use Credible to do more research on this topic to see if it’s the right move for you.

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2. Sign up for automatic payments

If you’re already in student loan repayment mode, putting payments on autopilot can be an easy way to save money.

“Almost all private student loan lenders offer the borrower the benefit of an interest rate reduction on automatic payments,” Walker said. This discount is typically 0.25 to 0.50 percent, but over the life of your loans, this can translate into significant savings.

Check your budget and cash flow to ensure automatic payments are possible. You don’t want to inadvertently incur an overdraft fee at your bank when an automatic payment is taken that doesn’t cover your balance.

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3. Don’t borrow more than you need

Borrowing only what you have to pay for school can save you from having more debt than you can handle.

Walker said the best way to go about this is to start with the number you think you’ll have to pay for school and then look deeper to see how you might be able to reduce it.

For example, he encouraged asking questions like:

  • Can you travel less or go to school closer to home?
  • Would borrowing textbooks be cheaper than buying them?
  • Is finding a roommate a realistic option to reduce housing costs?
  • If you’re just starting out in college, can you use the AP credits you earned in high school to speed up your enrollment?
  • Can you take a part-time or full-time job to make a living?
  • Are there scholarships, fellowships or dual degrees to fund the school?

Once you have an idea of ​​what you need to borrow, think about how that will work when it comes time to start paying off the student loan. Running the numbers through a student loan calculator can give you an accurate estimate of your payments.

Walker recommended thinking about what you expect to earn after you graduate. “If the monthly payment seems excessive, say more than 10 to 12 percent of your income, then you probably need to look again at ways to lower your overall borrowing costs.”

THEREFORE, STUDENT LOAN REFINANCING RATES ARE LOW

4. Consider refinancing when interest rates are low

Refinancing private student loans could save interest and optimize student loan repayments. Walker said the best time to refinance personal student loans is generally anytime you can reduce your borrowing costs, but make sure to shop around.

For example, when comparing loan options, you want to weigh the benefits of a fixed rate versus a variable rate. But it’s important to consider how your credit score and credit history fit into the mix.

Lenders typically offer the lowest interest rates on personal student loans to borrowers with a solid credit history. If you have a thin credit file or a lower credit score, it may be necessary to ask a co-signer to help you qualify for loans at the lowest interest rates.

If you’re not comfortable asking someone to co-sign, Walker said, the other option is to work on improving your score before attempting to refinance. When you’re ready for a refinance, consider using an online tool like Credible to make comparisons. You can get interest rate quotes from multiple lenders without hurting your credit score.

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5. Make a plan to pay off your debt

Private student loan debt can easily overwhelm you if you don’t have a plan on how to pay it off. When dealing with student loan repayments, start by taking stock of your loans.

“One simple thing that all student loan borrowers should do — but often don’t do — is keep a list of the different loans they’ve taken out,” Walker said.

Make a list of all the loans you have and the monthly payment and due date. Next, compare the total payment for all your loans to your budget to see if you can afford what you’re paying.

If your payments are higher than you’d like, you should consider refinancing if it could lower your rate and/or payment, Walker said. You can also learn about interest rebates and student loan forgiveness or repayment assistance that your employer may offer as part of your benefits package.

Consider making additional payments on the principal to pay off your loans faster. And most importantly, keep in touch with your lenders.

If you’re unable to pay due to financial difficulties, they may be able to offer flexible repayment options, including deferral or forbearance programs. Visit Credible to learn more about personal student loans and how to administer them.

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