7 Ways New Grads Can Save Money on Student Loans

 May 2, 2016
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Maybe you’ve been dreading your first student loan payment since the first day of college. Maybe you didn’t think twice about it in all four years. Either way, this should come as good news: there are plenty of ways to save money on student loans.

The sooner you learn the various ways to cut the cost of student loan debt, the more money you can save over time. Find out which of these options work best for you.

How to save money on student loans

1. Make interest payments during the grace period

If you have any subsidized federal loans, you don’t have to worry about interest accruing during the grace period following graduation. Lucky you!

However, if you have unsubsidized federal loans, interest will begin accruing throughout the grace period. Even though you aren’t required to make student loan payments during this period, that interest gets added to your balance and rolled into the principal. This means a costly, unwelcome scenario – paying interest on interest.

In order to prevent your student loan balance from ballooning during the grace period, it’s a good idea to at least make interest payments for those six months. If you don’t know which type of loan you have, contact your student loan servicer.

2. Get on the right federal loan repayment plan

Under the 10-year Standard Repayment Plan, you might end up with the highest monthly payments, but you’ll also pay off your debt faster.

If you opt for an income-driven repayment plan, on the other hand, it’ll take you 20 to 25 years to get rid of that debt. That extra 10 to 15 years of payments means you’ll end up paying more over the life of your loans due to the extra interest. When possible, choose the shortest repayment period possible to save money.

Of course, the last thing you want to do is struggle your way through a 10-year plan that only lands you in default. If you’re having trouble keeping up with your payments, or suspect you will, apply for an income-driven repayment plan.

3. Think twice before consolidating

Borrowers sometimes mistakenly believe that consolidating their loans will help save money On the contrary, consolidation results in a weighted average of your previous loans’ interest rates, plus an extra percentage on top.

Not to mention, consolidation usually ends up putting you on a longer repayment timeline. And if you consolidate your federal loans with a private company, you give up federal protections and benefits you might need later, including income-driven repayment plans, deferment, forbearance, and loan forgiveness.

If you’re looking to save money on student loans, refinancing at a lower interest rate is a far more attractive prospect. The only exception would be if the lower interest rate comes with a longer loan term that ends up costing you more over the life of the loan. And again, federal benefits are forfeited by refinancing with a private lender.

4. Set up automatic payments

Why risk forgetting to make payments when you can have them deducted from your checking account automatically? You’ll save money on late fees. Plus, most loan servicers offer a 0.25% interest rate reduction when you sign up for auto-pay, which could add up to hundreds of dollars in savings over the life of your loans.

5. Treat deferment and forbearance as a last resort

If you’re struggling to make your federal student loan payments, postponing them for a while may sound like sweet relief. What a great way to give yourself some breathing room, increase your income, and start paying on your loans when you’re better positioned to do so.

The problem is interest. All that time you’re not making payments, interest is continuing to accrue on unsubsidized loans in deferment – and on any loan in forbearance. Plus, there is always the chance you won’t be better off financially when the loans come due again, this time with bigger balances even more difficult to pay down.

6. Claim the tax deduction for interest paid on your loans

Each year, you should receive Form 1098-E from your student loan servicer(s), which shows you know how much you paid in interest.

You may be able to deduct up to $2,500 in interest every tax year, which lowers your taxable income and saves you a bit of money at tax time. You can even claim the deduction if someone else made payments on your behalf (like your parents) as long as the loans are in your name.

7. Pay off your student loans early

You’re probably wondering why you would want to make bigger payments than necessary. Hear us out – making more than your minimum payments every month means cutting down your repayment time and saving thousands of dollars in interest.

However, if you decide you want to send in extra payments, consider the following:

  • Decide whether you want to focus on your lowest-interest loan first (debt snowball) or your highest-interest loan (debt avalanche).
  • Make sure your lender knows how you want your extra payments applied. If you don’t tell them, they’ll decide for you.
  • Confirm that your extra payments are being applied correctly.

Here’s how to ensure extra payments are applied correctly.

Don’t rush it, though. There’s nothing wrong with making your minimums for at least a few months to be sure you’re on solid financial footing.

This is the beginning of a long process. It won’t always be easy, but it doesn’t always have to be difficult either. If you choose to be strategic about how you handle student loan payments, you can save a significant amount of money and focus on your other financial goals that much sooner.

Interested in refinancing student loans?

Here are the top 9 lenders of 2022!
LenderVariable APREligible Degrees 
1.74% – 9.51%1Undergrad
& Graduate

Visit Splash

1.89% – 5.90%2Undergrad
& Graduate

Visit Laurel Road

2.05% – 5.25%3Undergrad
& Graduate

Visit Lendkey

1.74% – 7.99%4Undergrad
& Graduate

Visit NaviRefi

1.74% – 7.99%5Undergrad
& Graduate

Visit SoFi

1.74% – 7.99%6Undergrad
& Graduate

Visit Earnest

1.86% – 6.01%Undergrad
& Graduate

Visit Elfi

1.74% – 7.99%7Undergrad
& Graduate

Visit Purefy

2.24% – 9.23%8Undergrad
& Graduate

Visit Citizens

Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Splash Financial.

Splash Financial Disclosures

Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount

The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice.

To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of June 1, 2022.


2 Important Disclosures for Laurel Road.

Laurel Road Disclosures

All credit products are subject to credit approval.

Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.

As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.

  1. Checking your rate with Laurel Road only requires a soft credit pull, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.
  2. Savings vary based on rate and term of your existing and refinanced loan(s). Refinancing to a longer term may lower your monthly payments, but may also increase the total interest paid over the life of the loan. Refinancing to a shorter term may increase your monthly payments, but may lower the total interest paid over the life of the loan. Review your loan documentation for total cost of your refinanced loan.
  3. After loan disbursement, if a borrower documents a qualifying economic hardship, we may agree in our discretion to allow for full or partial forbearance of payments for one or more 3-month time periods (not to exceed 12 months in the aggregate during the term of your loan), provided that we receive acceptable documentation (including updating documentation) of the nature and expected duration of the borrower’s economic hardship. During any period of forbearance interest will continue to accrue. At the end of the forbearance period, any unpaid accrued interest will be capitalized and be added to the remaining principle amount of the loan.
  4. Automatic Payment (“AutoPay”) Discount: if the borrower chooses to make monthly payments automatically from a bank account, the interest rate will decrease by 0.25% and will increase back if the borrower stops making (or we stop accepting) monthly payments automatically from the borrower’s bank account. The 0.25% AutoPay discount will not reduce the monthly payment; instead, the discount is applied to the principal to help pay the loan down faster.

Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.

Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.

Interest Rate: A simple annual rate that is applied to an unpaid balance.

Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.

KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.

This information is current as of April 29, 2021. Information and rates are subject to change without notice.
 


3 Important Disclosures for LendKey.

LendKey Disclosures

Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it  endorse,  any educational institution.

Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised variable APR is only available for loan terms of  5 years and is reserved for applicants with FICO scores of at least 810.

As of 5/17/2022 student loan refinancing rates range from 2.05% APR – 5.25% Variable APR with AutoPay and 2.49% APR – 7.93% Fixed APR with AutoPay.


4 Important Disclosures for Navient.

Navient Disclosures

You can choose between fixed and variable rates. Fixed interest rates are 2.99% – 8.24% APR (2.74% – 7.99% APR with Auto Pay discount). Starting variable interest rates are 1.99% APR to 8.24% APR (1.74% – 7.99% APR with Auto Pay discount). Variable rates are based on an index, the 30-day Average Secured Overnight Financing Rate (SOFR) plus a margin. Variable rates are reset monthly based on the fluctuation of the index. We do not currently offer variable rate loans in AK, CO, CT, HI, IL, KY, MA, MN, MS, NH, OH, OK, SC, TN, TX, and VA.


5 Important Disclosures for SoFi.

SoFi Disclosures

Fixed rates range from 3.49% APR to 7.99% APR with a 0.25% autopay discount. Variable rates from 1.74% APR to 7.99% APR with a 0.25% autopay discount. Unless required to be lower to comply with applicable law, Variable Interest rates on 5-, 7-, and 10-year terms are capped at 8.95% APR; 15- and 20-year terms are capped at 9.95% APR. Your actual rate will be within the range of rates listed above and will depend on the term you select, evaluation of your creditworthiness, income, presence of a co-signer and a variety of other factors. Lowest rates reserved for the most creditworthy borrowers. For the SoFi variable-rate product, the variable interest rate for a given month is derived by adding a margin to the 30-day average SOFR index, published two business days preceding such calendar month, rounded up to the nearest one hundredth of one percent (0.01% or 0.0001). APRs for variable-rate loans may increase after origination if the SOFR index increases. The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. This benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. The benefit lowers your interest rate but does not change the amount of your monthly payment. This benefit is suspended during periods of deferment and forbearance. Autopay is not required to receive a loan from SoFi.


6 Rate range above includes optional 0.25% Auto Pay discount. Important Disclosures for Earnest.

Earnest Disclosures

Student Loan Refinance Interest Rate Disclosure Actual rate and available repayment terms will vary based on your income. Fixed rates range from 3.24% APR to 8.24% APR (excludes 0.25% Auto Pay discount). Variable rates range from 1.99% APR to 8.24% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan refinance loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. The maximum rate for your loan is 8.95% if your loan term is 10 years or less. For loan terms of more than 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95%. Please note, we are not able to offer variable rate loans in AK, IL, MN, NH, OH, TN, and TX. Our lowest rates are only available for our most credit qualified borrowers and contain our .25% auto pay discount from a checking or savings account. Let us know if you have any questions and feel free to reach out directly to our team.


7 Important Disclosures for Purefy.

Purefy Disclosures

Purefy Student Loan Refinancing Rate and Terms Disclosure: Annual Percentage Rates (APR) ranges and examples are based on information provided to Purefy by lenders participating in Purefy’s rate comparison platform. For student loan refinancing, the participating lenders offer fixed rates ranging from 2.73% – 7.99% APR, and variable rates ranging from 1.74% – 7.99% APR. The maximum variable rate is 25.00%. Your interest rate will be based on the lender’s requirements. In most cases, lenders determine the interest rates based on your credit score, degree type and other credit and financial criteria. Only borrowers with excellent credit and meeting other lender criteria will qualify for the lowest rate available. Rates and terms are subject to change at any time without notice. Terms and conditions apply.  


8 Important Disclosures for Citizens.

CitizensBank Disclosures

Education Refinance Loan Rate Disclosure: Variable interest rates range from 2.24%-9.23% (2.24%-9.23% APR). Fixed interest rates range from 4.29%-9.73% (4.29%-9.73% APR). 

Undergraduate Rate Disclosure: Variable interest rates range from 5.37%- 8.81% (5.37% – 8.81% APR). Fixed interest rates range from 5.87% – 9.31% (5.87% – 9.31% APR).

Graduate Rate Disclosure: Variable interest rates range from 2.24% – 8.75% (2.24% – 8.75% APR). Fixed interest rates range from 4.29% – 9.25% (4.29% – 9.25% APR).

Education Refinance Loan for Parents Rate Disclosure: Variable interest rates range from 2.24%- 8.40% (2.24%- 8.40% APR). Fixed interest rates range from 4.29% – 8.90% (4.29% – 8.90% APR). 

Medical Residency Refinance Loan Rate Disclosure: Variable interest rates range from 2.24% – 8.75% (2.24% – 8.75% APR). Fixed interest rates range from 4.29% – 9.25% (4.29% – 9.25% APR).