By Christine Margiotta
Things You’ll Need:
Budget worksheet Contact information for loan lender(s)
Pay off Loans Faster
Step 1: Establish how much money can go toward paying off student loans each month by creating a budget worksheet that subtracts monthly expenses such as rent, food, clothing, utility bills and savings from your monthly income. Once you know what's left over, you know how much you can devote to paying off student loans.
Step 2: Pay off higher-interest credit card debt before paying off student loans, if you can. If you are paying more than you have to on student loans, it is more prudent to apply the extra money to the higher-interest debt. The faster you get rid of the extra payment per month toward credit cards, the sooner you will be able to apply that money toward paying off student loans.
Step 3: Create a savings account and if you can, stash away extra cash. If you are in a position where you can afford to set aside cash every month, allow it to accumulate until you have saved up the equivalent of at least three months worth of expenses. Then, apply anything you are able to save beyond that amount to your student loans.
Negotiate with Your Lender
Step 1: Meet with a financial aid counselor at your college or university before graduating to evaluate the amount of student loan debt you will have and your options for paying it off. Financial aid counselors can help you establish a repayment plan and help you skillfully negotiate with your lender to get the best deals and rates.
Step 2: Study loan consolidation plans for federally subsidized and unsubsidized loans. Since rates on these loans consistently change and vary depending on the market, be sure lock in the lowest interest rate possible on these loans to keep your monthly payment from fluctuating, then consolidate them into one loan payment per month. Loan consolidation is a great way to save money on your monthly payment, which can help you get rid of other higher interest debt quicker and then apply the extra money toward loan payments.
Step 3: Shop around for loan plans that might serve as more frugal substitutes for private student loans. These loans, which are given out by banking institutions and not by the federal government, tend to have much higher interest rates and sometimes cannot be consolidated. If the bank does allow you to consolidate the loans, it is often at an interest rate that will fluctuate with the market. Try to find a bank that will give you a fixed rate loan at a lower interest rate, then use this as a negotiating chip with your current lender to see if they budge. Ask a financial aid advisor at your college for help finding lenders who will consolidate private loans, or research possible options at local banks so you are able to access the bank quickly should you have any questions or concerns.