student-loan-hacks

My Favorite Student Loan Hacks

Michael Lux Blog, Lower Payments, Student Loans 0 Comments

I’ve been writing for this site since early 2013.  I’ve also been slowly working my way through six figures of student loan debt.  In my years of dealing with student loans, I’ve come across many hacks that take very little effort, but go really far.  Today, I’ll be sharing my three favorite.

Hack #1: Pay Your Loans When You Get Paid

Spoiler alert: this trick won’t make your student loans disappear overnight.  That being said, it is something easy that literally everyone can do.

Many borrowers don’t realize that their student loan balance accuses interest on a daily basis.  The higher your balance and interest rate, the more interest you will pay each day.

The idea behind this one is simple.  Don’t make your student loan payments when the bill is due.  Make the payment when you have the money.  There is no reason to unnecessarily leave a student loan balance higher than it needs to be.

Hack #2: Turn Your Good Credit Into Lower Payments

Many student loan lenders get borrowers to sign up for loans with absurdly high interest rates.  College students are easy targets because their biggest concern is getting the amount they need when they need it.  Interest rates are less of a consideration.

I frequently see borrowers with private loan interest rates ranging from 3% to 11% or more.  How is it that some rates are triple the rates of others?  If interest rates are supposed to be reflective of the risk to a borrower, how is it that these numbers fluctuate so greatly?  My guess is that it is because some lenders know they can get away with the high rate loans, so they take the easy money.

The good news is that if you have high interest student loans, it is surprisingly easy to get the interest rate lowered.  When you got your old loans, you didn’t have a degree and you were likely unemployed.  With a degree, a job, and a credit score, loaning money is much less risky.  That means lower interest rates if you refinance.

I always advise great caution when it comes to refinancing federal student loans with a private lender (going this route forces you to give up federal perks like income based repayment and loan forgiveness), but the refinance option is great for private loans and certain federal loans.

What makes this hack particularly great is that there are a ton of companies fighting for your business.  More competition means better deals for the consumer.  Best of all, there is no limit to the amount of times you can refinance.  You can take your business from one lender to the next as interest rates drop or your credit score improves.

Hack #3: Lender Programs for Struggling Borrowers

Most student loan borrowers know that income driven plans are available for federal student loans.  What makes these plans great is that borrowers have the security of knowing that federal student loans will only ever take a certain portion of your income… you will never have to give up half a months pay to cover your student loan bill.

Unfortunately, private lenders have far fewer options and a reputation for being ruthless.  Fortunately, some of these lenders have learned to recognize that some money is better than no money.  In certain cases lenders may even cut your interest rate if you are unable to keep up on your loans.

Navient has a rate reduction program for struggling borrowers, but for obvious reasons, they don’t advertise it.  If you are able to get enrolled, you can get lowered monthly payments and extremely low interest rates.

The best part about this option is that even though you the borrower are struggling to make payments, you are still reducing your loan balance.  This option is so much better than a deferment or a forbearance.  When you don’t pay anything at all, the balance goes up.  If you are making smaller payments, but at a lower interest rate, you still are making some progress.

Readers: What are your favorite student loan hacks?