Ways You Can Bring Down How Much You’re Paying For Student Loans
The cap and gown might be long gone, but your student loan? It’s not going anywhere anytime soon.
You’ve looked at some of the student loan payment options: the possibility of federal forgiveness, alternative payment plans, and the like. But what you’re really searching for is how to cut monthly costs and lower your loan simultaneously. The good news is it’s definitely doable if you learn how to lower the interest on your student loans.
Here are five ways that you can reduce your loan interest and cut your student loan costs.
The federal government and many private financial institutions offer a quarter-point (0.25) interest rate cut if you allow them to automatically deduct payments from your bank account. Some private lenders shave as much as half a percentage point (0.05) off your rate. In addition, automatic payments help you avoid missed payments that can hurt credit score.
Times change. So, too, do interest rates. Refinancing for a cheaper student loan is one of the most powerful ways to lower your student loan interest rate. Depending on a variety of factors that impact the economy, interest rates fluctuate over time, which means you might be able to refinance to a lower, money-saving rate. Not only will you save money on your monthly payments, you’ll reduce the overall cost of your loan, which can help you pay it off sooner than originally planned. Refinancing requires certain qualifications, including a stable income and good-to-excellent credit. Unfortunately, the government doesn’t refinance federal student loans; if you have this type of loan, you’ll need to roll over your debt to a loan from a private lender if you’re looking to refinance.
It goes without saying that on-time payments can help you build good credit, but they can also help you save money. If you consistently pay your loan on time for three to four years, some private student loan lenders will agree to trim your interest rate. Not all lenders offer this discount, and most probably won’t offer the lower rate unless you ask. But it’s always worth inquiring.
Knowing who you’re borrowing from could pay off. Some private lenders offer discounts if you or a family member already has a bank account or holds another loan with the bank. One example: Citizens Bank will take a quarter of 1 percentage point (0.25) off your interest rate if you, or your co-signer, has an existing account with the bank. Keep in mind that this type of discount only applies if you have an account at the time you take out your student loan, not after.
Sometimes the sum is better than its parts. You might want to consider taking all of your individual loans, including your student loan, and rolling them into one lower-interest loan. By reducing your interest rate in this way, you’ll free up more money each month that you can then choose to apply to another debt, invest, save, or put towards a post-graduation splurge.