Graduates,
Your six-month grace period on your student loans will be up before you know it. Matter of fact, if you graduated along with the majority of the other graduates in May of this year -- around November, ole Sallie is going to start paying a lot more attention to you.
See, you'll get these statements in the mail every month and when you open them up -- what you may find might shock you. I'm sure you thought you were borrowing a lot less.
Having a balance that high looking back at you and realizing how long it will take you to pay it back can be intimidating. How do I know? Well, I'm speaking from experience.
I graduated college 10 years ago and every time I open one of my statements and see the balance -- along with the tentative payoff of 2029 -- it's enough to make me want to crawl back home with mama.
However, I haven't done that because I've learned to deal with it and so will you. There are ways to get rid of those suckers, even though it's going to feel like you're being tortured slowly.
Luckily for you, I've got the scoop on four easy ways you can save money on your student loans. They aren't going to go away with the snap of your fingers, so you might as well save as much money as you can while dealing with them, right?
Let's not delay any further. Here are four easy ways to save money on student loans.
1) Pay the interest accruing on your loan during your grace period.
For those of you with the misfortune of having a few subsidized federal student loans, the government has at least extended the courtesy of allowing no interest to accumulate during your grace period. Count your blessings on this little reprieve and focus on your unsubsidized student loans.
If you have unsubsidized student loans, they are indeed accruing interest during your six-month grace period. Even worst, if you don't pay the interest during this time it will capitalize. That's a fancy way of saying you'll be paying interest on top of interest.
To prevent your loans from growing any more than it needs to, simply pay any accumulated interest during your grace period.
2) Set up auto-payments to reduce your interest rate.
Many student loan providers offer a student loan interest rate reduction (typically .25 percent) when you set up an auto debit. To do this, contact your lender to determine if they offer this money-saving feature.
If they do, you'll need your bank routing and account number to set up the auto-debit to occur on or before your due date each month. Not only will you receive an interest rate reduction, you'll minimize the risk of paying your student loans late!
3) Choose the right repayment plan.
Your lender will automatically put you in a standard ten-year repayment plan. This comes with its own set of pros and cons.
The upside is you will pay your student loans off in ten years. The downside is your payment might be too much to afford on an entry level salary which could put you at risk of default.
If you default on your loans, you risk wage garnishment and excessive fees. If your payment is unaffordable, it's best to choose an income-driven repayment plan that will ease budgetary restraints as you begin your new career.
However, don't get too comfortable on an income-driven repayment plan. The payment periods are longer and you'll end up paying more in interest over the life of your loan. Only use these type of plans if you can't afford a standard repayment plan because, in the long run, they won't save you money.
4) Consider refinancing your student loans.
Speaking of standard repayment plans, if you can afford higher monthly payments, you might want to consider refinancing your student loans. When a borrower refinances their student loans, they are essentially taking out a new loan with a private lender.
The idea is to score a lower interest rate so you can save money on your student loans. The repayment periods can vary; however, a lower interest rate can also help you accelerate your loan payoff. To truly understand how this process works, check out this student loan refinance and consolidation guide to determine how this opportunity could work for you.
Wrapping It Up
Of course, this isn't all the ways you can save money on student loans. There are quite a few different strategies you can employ to help you with your student loan repayment efforts. I just wanted to give you some quick easy tips that will help ease the shock you'll receive when Sallie sends you that letter. Don't say I didn't prepare you.