Student loans can feel like a heavy weight on your shoulders. The numbers are staggering: over half of all graduates carry student loan debt, averaging a whopping $28,400! That’s more than most car loans combined, translating to a monthly payment of around $300 for many graduates. But before you resign yourself to a decade (or more) of hefty payments, here’s some good news: there are ways that how you can reduce your total student loan cost.

Start Early and Pay Consistently

One of the most effective strategies is to chip away at your loan balance early. Even while you’re still in school, consider making the least payments towards your loan. Many loans don’t gain interest during this time, so any payments you make reduce the principal amount. This translates to significant savings down the line.

Timeliness is Key

Image by panyastudio9 on freepik | Timely payments are essential for responsible borrowing and lowering your overall loan expense.

Making your monthly payments on time is crucial, not only for responsible borrowing, but also to reduce your total loan cost. Late payments often incur penalties or higher interest rates, adding to your debt burden. Set up automatic payments through your bank to ensure you never miss a deadline.

Harness the Power of Automation

Many lenders, both private and federal, offer automated repayment options. These can come with a sweet perk: a discounted interest rate! By enrolling in automatic payments (ACH – Automated Clearing House), you can save money on your loan. Remember to maintain enough funds in your account to cover the automatic deductions.

Refinancing for a Brighter Future

Refinancing your student loans at a lower interest rate can be a game-changer. This strategy might be ideal after landing your dream job or securing a mortgage. The key is to secure a lower interest rate without extending your repayment term. Refinancing also allows you to consolidate many loans into a single payment, simplifying management.

Scholarships and Grants: Free Money for Free!

Scholarships and grants are lifesavers because they don’t need repayment. Every dollar you receive through these sources translates to less student loan debt. Explore scholarship opportunities, research grants, and don’t hesitate to seek guidance from your financial aid department. Remember, free money is the best kind of money when it comes to reducing your total loan cost.

Prioritize Federal Loans

Federal student loans offer lower interest rates compared to private loans. Additionally, they often qualify for loan forgiveness programs and income-driven repayment plans, providing valuable safety nets down the road. Exhaust federal loan options before resorting to private loans with less favorable terms.

The Boost

Image by rawpixel.com on freepik | Double up your monthly payment by splitting it in half and making bi-weekly payments.

Here’s a clever trick to speed up your loan repayment: split your monthly payment in half and make payments every two weeks. This might seem like a small change, but the math adds up! Instead of 12 monthly payments of $300, you’ll be making 26 payments of $150. This translates to an extra $300 paid towards your loan, shaving a year off your repayment term.

Round Up for Faster Payoff

Another easy way to make a dent in your student loan debt is to round up your monthly payment to the nearest $50. If your current payment is $200, rounding up to $250 adds an extra $50 every month. This small increase can chip away at your loan balance over time, helping you reduce your total loan cost without feeling a major financial strain.

Make the Most of Bonuses and Refunds

Tax refunds and annual bonuses are excellent opportunities to make extra payments toward your student loans. These windfalls can reduce your principal amount and save you money on future interest payments. Every extra dollar applied to your loan translates to less debt.

Exploring Repayment Options

While not cost-saving, understanding various repayment options can be beneficial. Extended repayment plans, graduated repayment plans, income-driven repayment plans, and student loan deferment might be available depending on your circumstances. These options can extend your repayment term, but it’s crucial to weigh the potential benefits (lower monthly payments) against the drawbacks (higher interest paid). Additionally, the COVID-19 pandemic has resulted in some student loan forgiveness programs. Explore these options if available, as they can reduce your total loan cost. Bankruptcy may also be an option, but it’s important to consult a qualified professional to understand the complex relationship between student loans and bankruptcy filing.

The Bottom Line

Image by freepik | Crafting a practical budget that considers your student loan payments is vital.

How to reduce your total student loan cost: The best strategies involve a combination of proactive planning and smart financial management. Focus on grants and scholarships, start making payments early, consider refinancing, and explore ways to make extra payments whenever possible. By taking control of your student loans and implementing these strategies, you can free yourself from the burden of debt faster and achieve your financial goals. Here are some extra tips to keep in mind:

• Shop Around for Refinancing: Don’t settle for the first refinancing offer you receive. Compare rates and terms from many lenders to secure the best possible deal.
• Beware of Scams: Unfortunately, student loan scams are prevalent. Be wary of unsolicited calls or emails promising immediate debt relief. Always deal with your loan servicer or reputable financial institutions.
• Budgeting is Key: Creating a realistic budget that factors in your student loan payments is essential. This will help you track your spending, identify areas for potential savings, and free up resources for extra loan payments.
• Consider a Side Hustle: Earning extra income through a side hustle can provide extra funds for tackling your student loan debt.
• Seek Guidance: Don’t hesitate to seek professional guidance from a financial advisor or credit counselor. They can provide personalized advice and strategies tailored to your unique financial situation.

Note:- Managing student loan debt is a marathon, not a sprint. By staying informed, making smart financial decisions, and implementing these strategies, you can reduce your total loan cost and achieve financial freedom sooner.