7 Tips to Pay Off Multiple Student Loans
Getting a college degree is a big investment that leaves many students with a lot of debt. This means that a lot of people will have to take out more than one college loan.
For example, the Education Data Initiative shows that between 39% and 50% of student loan borrowers have bills from both college and graduate school.
If you have more than one student loan, plan ahead. A good plan can help you save a lot of money on interest. Borrowers who are most likely to be successful know where they stand and what payment choices will work best for them.
It can be hard to choose which loan to pay off first when you have a lot of them. Here are some tips on how to handle paying back multiple student loans so that your finances stay in good shape.
Sort things out.
Before you can figure out how to pay off your student loans, you need to know exactly where you stand right now.
Start by writing down all of your student debt and sorting them by whether they are federal or private. The loan servicer or holder, statement amounts, interest rates, and monthly payments should all be in the data.
Think about Affordability
Things with your money may have changed in the past year or since you started making payments. Make a list of all your monthly income and costs, as well as any other debts you have, like credit card balances, so you can figure out what kind of monthly loan payment you can afford.
Getting a clear picture of your present position will help you keep your eye on your long-term debt repayment goals.
Think About the Kinds of Loans
Different people have different ways of paying off various student loans. On the other hand, it might be better to deal with private student debt first. Private lenders are usually not as flexible as federal lenders when it comes to loan perks for borrowers. For example, federal loans offer deferments and repayment plans based on income.
Also, the interest rates on private student loans may be higher. These kinds of information are very important as you make your repayment plan. You can better plan your way to paying back your loans once you know all the details of each one.
Know what you can do.
Forbearance choices are available for most student loans, even some private ones. This benefit lets people who are having trouble making their payments stop doing so while interest and late fees keep adding up.
Forbearance may be a good way to avoid late payments and keep your cash flow steady if you’re having trouble with money or are healing from a big loss. But because it could make your loan balance go up over time, think carefully about this short-term fix and how it might affect your long-term finances.
Look at different ways to pay.
The avalanche method is based on the idea that you should pay off your loan with the biggest interest rate first. You are also making the minimum payments on your other bills at the same time.
You pay the least amount due on each loan and then pay the loan with the smallest sum first. This is called the “snowball” method. As you go from smallest to largest loan amount, paying off the smallest loan first gives you a boost as you move on to the next loan with the smallest balance and continue this process until all the loans are paid off.
Pay More Than the Least Amount Due
If you can afford it, pay more each month toward your college loans. When you lower your student loan debt, you shorten the length of the loan and lower the interest that you pay over time.
This is a “set it and forget it” way to make regular payments. If you pay more than the minimum, you will reach your goal of paying off your student loan debt faster. It’s okay to give a little bit. Start with what you can afford and slowly add more to your extra payments over time.
Refinance or Combine Loans
You might be able to pay off your student loans faster without having to make extra payments if you refinance them at a lower interest rate.
When you consolidate your student loans, they are combined into one new loan. You might be able to get a lower interest rate or a shorter time to pay back the loan this way.
Before you change the way your loans are structured, make sure you fully understand both the loans you currently have and the ones you want to choose in their place.
Going to school is a good thing, but having to deal with various student loans can be stressful. Talk to the people who handle your loans, and always read over anything they send you. You should get help from a trustworthy, unbiased group, like a non-profit financial guidance group, if you need it.