How Can You Reduce Your Total Loan Costs While in School (for Student)

In the United States, education is the second largest expense after housing. Due to the high cost of college, many students borrow loans. These student loans are bound to be costly in the long term as the interest charged will increase the total amount to be paid back. In this article, we will explain how to reduce the total loan costs while in school.

Reducing Your Total Loan Costs While in School

Many people choose to pay their student loans while they are still in school to save money before the interest accrues. There are manageable ways to reduce the total cost of student loans.

Here’s how:

1. Pay off Your Student Loan Early

To reduce the total cost of your student loan, try to pay off your loan while you are still in school. By making payments against your loan balance, it will lower the total loan. This is also especially effective since many loans don’t start charging interest while you’re still enrolled. Or try to pay at least enough to cover the amount of interest you earn each month.

2. Pay Your Student Loan on Time

Paying your student loan on time can also reduce the total cost of your loan. If you make late payments on your student loan, then your loan costs will become more expensive. Remember, some student loans have higher interest rates for missed payments. Therefore, make sure you pay your loan on time every month to avoid higher interest or additional fees applied to your loan balance.

3. Use Automatic Monthly Payments

Use the automatic monthly payment method to pay your student loan. By signing up for automatic debit, you will avoid late payments. In addition, by using automatic debit, you may also be able to get a discounted interest rate. This can come down around 0.25%. To find out if your student loan qualifies for this interest rate discount, you can contact the lender. If you have set up automatic payments, then always make sure you have enough money in your account to pay for it.

4. Get Scholarships and Grants before Private Student Loans

One of the most common ways to reduce the total cost of your student loans is by getting scholarships and grants that do not need to be repaid. The government through FAFSA, private organizations and funds, and companies provide awards of the type of scholarships and free money for education. Therefore, apply for scholarships and look for grants. In this case, you can ask for help from the financial aid department. Before you apply for scholarships, make sure you are eligible to apply for a scholarship.

5. Refinance Your Student Loan

Try to refinance your student loans at a lower interest rate so you can save a lot of money. Usually, refinancing student loans can be done after you land your first dream job. In essence, you should be able to get a lower interest rate and avoid extending the payment term. In other cases, if you have more than one loan, then refinancing can also give you the ability to consolidate student loans into one payment, ultimately making it easier for you to manage the payments.

6. Look into Federal Student Loan First

If you want to reduce the total cost of borrowing, you can consider Federal Student Loans. You should know that Federal Student Loans have lower interest rates than others and qualify for loan forgiveness programs. Additionally, Federal Student Loans also offer some form of income-based repayment plan. So, to be able to reduce the total cost of borrowing, try to look for federal loan options first. Once you graduate, this will give you more options if you need help with payments.

7. Make Payments Every Two Weeks

Instead of paying your student loans every month, you could try making your monthly payments in half and paying them every two weeks. You would think that the numbers would feel the same every month. However, with the right calculations, it will actually be able to help you pay off your student loans more quickly. Are you curious about how it works? Try studying the following explanation. In one year of monthly payments, you make 12 payments of $400, so you can pay off $4800. Then, if you make the monthly payments in half and pay every two weeks, you make 26 payments of $200, so you can pay off $5200. The difference is $400. Maybe it seems small, but by using this method you will definitely be able to shorten your loan payments.

8. Collect Your Monthly Payments

To make more payments on your student loans, try another easy way, namely by rounding up your monthly payments to the nearest $50. For example, if your payment rounded up is an additional $25, then you would make an extra payment each year by adding a certain amount of money to your monthly payment. If you do this, it will definitely help you pay off your student loan early.

9. Make One Extra Payment Each Year

Some of the previous tips are focused on helping you make extra payments so you can reduce your loan amount quickly. This time we will also invite you to make one extra payment every year to reduce your total loan. Try to make extra payments every year. For example, when you have received an annual bonus or received a tax refund. You can use the money to make extra payments. That way, you will avoid paying interest, and you can also save your money.

Conclusion

The high cost of education makes a number of students borrow student loans. This loan certainly has high interest, especially if payments are made over a relatively long period. Some ways to reduce total student loans are pay off your loan early, pay your loan on time every month, use automatic debit, get scholarships and grants, etc. Make sure you can do some things above so that you will be able to reduce your total student loans. In addition, if you are having difficulty meeting your student loan payments, you can contact a student loan attorney who will help you find a solution.