When was the last time you thought about paying off your student loans? If you’re like most student loan borrowers, you probably try hard not to think about them – unless it’s to dream about winning the lottery and paying them off in one fell swoop.
But what if I told you there are easy ways to save money while paying off your student loans and be done with them sooner – no Mega Millions required? A few small adjustments can actually lead to big financial gains, if you know how to take advantage of them. Here are three student loan repayment strategies to consider:
1. Set up automatic billing
Let’s start with the easiest one – signing up for automatic payments with your lender or loan servicer. Most lenders offer a small interest rate deduction (typically 0.25%) for doing this. It may not sound like much, but every little bit counts when it comes to chipping away at total interest. For a borrower with $30,000 in loans (the average undergrad debt) at a 6.8% interest rate and 10 year term, a 0.25% reduction in interest rate would save $460 in interest over the life of the loan.
How much interest could you save? Download a free ACH Interest Rate Reduction Calculator here.
2. Look into student loan refinancing
One of the best ways to save money on student loans is to lower your interest rate by refinancing your student loans. Many borrowers become eligible for this option a few years after they graduate, when they’re steadily employed and their financial situation has improved. Not only does refinancing slash interest, it can also reduce your monthly payments or shorten the amount of time it takes to pay off your loan. In the case of our 30K/6.8%/10 year borrower, reducing that interest rate by just one percentage point (to 5.8%) saves $1822 in total interest.
What could you save? Contact SoFi to find out.
3. Pump up your payments
Prepaying, or paying more than the minimum on your student loans, is another very effective way to save money and be done with your loans sooner. Of course, most borrowers don’t feel like they have a lot more money to put toward their loans each month, but even a small amount can make a difference. If our 30K/6.8%/10 year borrower paid an extra $50 each month, he’d save $2,441 in interest AND be done with his loans 20 months earlier.
A note about prepaying – check with your student loan servicer to ensure that extra payments are put toward your principal instead of being earmarked for future payments.
What could you save? Download our free student loan refinancing and prepayment calculator here to do the math on your loans.
This guest post comes from our friends over at SoFi, a leading peer-to-peer lender focused on transforming financial services. SoFi’s affinity-based marketplace connects high-quality alumni borrowers and investors directly, benefiting them both by bypassing the banks. Since its launch in 2011, SoFi has funded over $450 million in loans and has more than 5,000 members. To learn more, so our SoFi review.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Rates (APR)||Eligible Degrees|
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Check out the testimonials and our in-depth reviews!
|2.63% – 7.75%||Undergrad & Graduate||Visit SoFi|
|2.57% – 6.32%||Undergrad & Graduate||Visit Earnest|
|2.80% – 7.02%||Undergrad & Graduate||Visit Laurel Road|
|2.68% – 8.79%||Undergrad & Graduate||Visit Lendkey|
|2.57% – 6.65%||Undergrad & Graduate||Visit CommonBond|
|2.62% – 8.69%||Undergrad & Graduate||Visit Citizens|