Loan payment

Make the most of the student loan payment break: 5 ways to take control

If you are one of the 43 million people in the United States with federal student debt, your required payments are suspended until August 31. The US Secretary of Education also suggested the break could be extended again, the fifth time since March 2020. And President Joe Biden has also pledged to forgive some student loan debt, though his administration has yet to release details.

If you want make payments during the freeze and take advantage of the 0% interest rate, you can, but you’ll need to set up repayment online or by contacting your loan provider. If you have private loans, your loan provider may have offered you an extended forbearance, but if not, you’ve probably already started making payments again.

No matter which category you fall into, once you’ve started paying off your student loan again, there are plenty of ways to simplify the process and even save time and money along the way. Here are five ways to make it easier to pay off your student loan and, if you can, pay off your balance faster, so you can get out of debt faster without breaking your monthly budget.

1. Refinance for a lower interest rate

One of the best ways to maximize your student loan repayment is to refinance your private (and even federal) student loans. It can help you:

  • Lock in a lower interest rate
  • Consolidate your balances
  • Simplify reimbursement on one account
  • Adjust your monthly payment according to your budget

Refinancing is especially useful if your credit has improved since taking out the loan, and can also be used to release a co-signer from your student loan debt. However, no student loan refinancer is perfect for every borrower, so it is important to assess affordability, borrower eligibility criteria, and customer service when researching refinancers.

You can refinance all your loans or just select balances. It is important to note, however, that if you refinance federal student loan debt into a private refinanced loan, you may lose certain benefits, including forbearance or deferment, repayment contingent on income, and student loan forgiveness Opportunities.

2. Make additional payments

Whether it’s an extra $20 a month or an extra payment every year, pay off your student loans a little earlier than expected can help you save on interest and settle your debts faster. Whenever you have room in your budget, making extra payments can affect your student loan balance – although you should always pay off higher-interest debt first, like cards credit and personal loans.

Most lenders will allow you to make capital-only contributions in addition to your scheduled monthly payment. The sooner you reduce your principal balance, the less interest you will pay over the life of the loan and the sooner you can completely eliminate the debt.

3. Sign up for automatic payment

By signing up for automatic payment, you can simplify your monthly payments. There’s less risk of making a late payment – ​​which could incur charges and even affect your credit – and it’s one less thing to worry about.

Plus, it could also save you some money. This is because many lenders offer discounts in exchange for setting up automatic payments on your loan. These autopay rebates are typically around 0.25%, which can add up over time.

4. Consider income-driven repayment plans

Depending on the type of loan and what you can afford each month, you may want to consider the different repayment plan options available to you.

Some federal student loan borrowers may qualify for income-based repayment plans. There are four to choose from:

  • REIMBURSEMENT plan (revised according to your income)
  • PAYE plan (pay as you earn)
  • IBR (Income Based Reimbursement) Plan
  • ICR scheme (income contingent reimbursement)

While a standard repayment plan is often the best choice for paying off your loans as quickly as possible, these income-based options can help make monthly payments more affordable for borrowers who need to limit payment amounts. Eligibility is based on family size and discretionary income (after-tax income and necessities are paid for).

By signing up for one of these programs now, before loans become due again in May, you can ensure that you are able to budget your monthly payment.

5. Check if you qualify for student loan forgiveness

Usually, student loan forgiveness is available to federal borrowers who work as eligible public servants, such as teachers, government employees, and nonprofit workers. Additionally, loan forgiveness may be on the table in unique circumstances, such as the COVID-19 pandemic, or as a result of government policy, such as the $5.8 billion discharged for borrowers with disabilities in August 2021.

Loans can also be canceled or canceled for other reasons; if your school closes before or shortly after you graduate, if you or a borrowing parent dies or (in some cases) after declaring bankruptcy. Other borrowers can take advantage of established programs that can forgive, cancel or discharge their debt. It’s important to remember, of course, that you will still need to make one-time payments on the loan(s) until you qualify for a rebate.