- 1. Understand what you owe
- 2. Student loan refinancing and debt consolidation
- 3. The avalanche method
- 4. The snowball method
- 5. Set up autopay for your payments
- 6. Pay your loans bi-weekly
- 7. Apply any extra payments to the principal balance
- 8. Bring in extra income and dedicate it to loans
- 9. Use a budget
- 10. Set up a reward system for your progress
- 11. Know that some months are challenging
- The bottom line
1. Understand what you owe
- Type of loan (federal, private, personal)
- Federal loan type (if applicable) such as subsidized, unsubsidized, PLUS loans, etc.
- Interest rate of loan and is it fixed or variable?
- Student loan balance
- Loan term
- Loan servicer
- Minimum payment required
- Total amount of loan to be paid, including interest
2. Student loan refinancing and debt consolidation
Student loan refinancing
Benefits of refinancing
- Potential lower interest rate: Depending on your credit agreement, your new interest rate may be lower, which means you’ll pay less interest over the life of the loan. Federal loans tend to have a higher interest rate.
- Longer loan terms: Get relief with lower monthly payments by stretching out your student loan payment terms longer. Although with this option, you’re likely to pay more in interest over time.
- Remove a co-signer: Refinancing gives you the opportunity to remove a co-signer from your loan.
- New lender: Refinancing allows you to choose a new private loan lender, which means you might receive better customer service or added convenience with your new one.
Pitfalls of refinancing
- Do you have federal or private loans? If you refinance a federal loan, you lose quite a bit of advantage, such as: no credit score required; forbearance and deferment options; student loan forgiveness programs, such as Public Service Loan Forgiveness (PSLF); a repayment grace period; income-based repayment plans, such as PAYE and REPAYE that lower your payments while your earnings are lower; no co-signer required.
- Credit score: Private loans use your credit score is a determining factor for refinancing.
- Income requirements: Private loans have income requirements, whereas federal student loans do not.
- Your term length will change: The terms of your loan will change but are you saving any money now that your loan is stretched over more months or years?
3. The avalanche method
4. The snowball method
5. Set up autopay for your payments
6. Pay your loans bi-weekly
7. Apply any extra payments to the principal balance
8. Bring in extra income and dedicate it to loans
- Rideshare driver
- Tasker for TaskRabbit
- Selling items on eBay and Etsy
- Offer freelance services
- Become a virtual assistant
- Open an online store
- Teach for VIPKids
- Create an online course
9. Use a budget
10. Set up a reward system for your progress
11. Know that some months are challenging
The bottom line
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