Far too many people spent 2014 being hounded by lenders and student debt. Though the trillion dollar student loan problem may seem insurmountable, in most cases people are not taking advantage of all of the opportunities available to borrowers. Many people are only a few phone calls away from saving money each month.
- Don’t pay only what is due: Just making the minimum payments on your student loans means you will be making payments that mostly consist of interest for a long time. The key to getting rid of the debt is knocking down the principal. Lenders want you to drag out your repayment as long as possible. More interest means more profit.
- Put together a smart plan of attack: Paying a little bit extra on each of your loans is a step forward, but it isn’t the best system. The ideal way to eliminate student debt is to pay the minimum on every loan except one. Use every spare penny you have to attack that single loan. Most people choose to either eliminate their smallest loan first so they can totally remove one bill, while others choose to pay of their highest interest loans first. Regardless of how you feel about the avalanche vs. snowball repayment methods, the key is to have one loan in your sights and to eliminate it.
- Get on the right federal repayment plan: Last year the government released statistics that showed that many people were signed up for the wrong federal repayment plan. The default repayment plan is the 10-year plan. However, the best plan for most people is the Income Based Repayment Plan or Pay As You Earn. Even if you can afford the higher payments, getting them reduced, allows you to apply the money saved each month towards your higher interest debt.
- Use your current financial situation to get lower interest rates on your loans: Whether you are broke or doing great, there are ways to get your interest rates lowered. For people struggling to keep up on their loans, many private lenders now have programs to reduce the interest rate to help you keep your head above water. Sallie Mae started one such program a couple years ago, and other lenders have started to follow suit. If you have no problem keeping up with your student loan debt, you likely could refinance your student loans to lock in a lower interest rate. There is a huge list of companies offering student loan consolidation and refinancing. Regardless of your situation, paying more on interest than absolutely necessary is just a waste of money. A few forms or phone calls could save thousands.
- Don’t forget about your cosigners: The people who cosigned on your student loans went out on a huge financial limb for you. Because cosigning a loan can affect your credit, you should have a plan of attack to try and get your cosigner released from you loans. Even if your lender denies a release, there are steps you can take to get your cosigner off of the loan. Remember, the fine print of your student loan agreement can also screw over your cosigner. Some lenders make the cosigner pay off the loan in the event the borrower dies. Because of this, you may also want to think about having a life insurance policy in place to protect your cosigner.
Addressing student loan issues is usually tedious at best. Customer service is often terrible, and no matter what you do, there is no easy way to make the debt just disappear. However, if you are willing to do a little extra legwork, your efforts could make a huge difference in your personal student debt situation. What are you waiting for?