Can I Reduce My Student Loan Payments

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According to an article published by the Wall Street Journal, the class of 2015 carries the most significant amount of student debt. The average loan amount in this class is over $35,000.

Can I Reduce My Student Loan Payments

Student loans help cover the costs of higher education and are repaid over a period of time. Paying off loans can seem overwhelming, but knowing how to manage them can help relieve stress and keep your finances in order. Borrowers should follow these tips to manage what may at first seem like too much debt:

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When borrowers are deciding when to pay, it’s important to understand which payments should be prioritized. Personal loans can have variable interest rates, which makes it more difficult to manage financially. People should focus on paying off this debt first and then move on to other payments.

Borrowers should be aware of all their student loans, notes the Institute for College Access & Success. Knowing whether certain loans are forgivable and how much you owe can help you navigate the repayment process.

Paying off good loans right away can help the borrower save more money in the future.

In addition to personal loans, some people can also get federal loans to help pay for college.

How To Prepare For Student Loan Payments To Resume

With federal loans, borrowers can decide on a payment plan that fits their financial situation. People who are currently unable to pay a large portion of their debt should choose a plan that allows them to pay off the loan in smaller amounts. However, they end up paying more interest.

According to Federal Student Aid, the Graduated Payment Plan allows borrowers to make lower payments now and increase their payments each year. This is especially beneficial for those who continue their professional life and expect to see their income grow.

If a person can repay the loan immediately, the standard plan allows the borrower to make higher payments for a shorter period of time, Federal Student Aid noted. The advantage of this option is that it accrues the least interest because the loan is paid off faster.

When borrowers take out more than one loan, they should explore debt consolidation options. This simplifies payments and reduces the risk of non-payment and credit default.

Ways To Prepare For Student Loan Payments

While consolidating student loans is convenient and sometimes lowers the interest rate, in some cases it may not be the best option, notes US News & World Report. Sometimes people can end up paying more, especially if interest rates go down and they decide to consolidate their student loans at a lower guaranteed rate. Borrowers should speak with a financial advisor to determine if consolidation is the best option.

Student loans can seem overwhelming, but with proper budgeting and savings, borrowers can better manage student debt. Setting aside money or signing up for automatic payments can help a borrower stay on track and make regular payments. It is important to include student loans in financial plans.

In addition, borrowers have to pay a little extra each month if they borrow more money. Paying off your loan faster will ultimately save the person more money down the road.

The information in these articles is for informational purposes only. This is Central Bancompany, Inc. and/or its affiliates should not be construed as an opinion and does not imply approval or endorsement of any of the information, products, services or providers mentioned. All information is provided without any representation, warranty or guarantee as to the accuracy, currency or completeness of the information.

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Paying Student Loans Again Could Feel Like A 5% Pay Cut

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Together, they borrowed $1.5 trillion to get their degrees, and paying it back wasn’t easy. About one in 10 student loans are in default, and while the average repayment period varies depending on the amount owed, it likely takes at least 10 years and can be as long as 30 years.

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Members of the Class of 2019 who took out student loans owe an average of $31,172 and their payments are less than $400 a month. This is a serious and unnecessary graduation gift, so it’s important to know how to minimize the damage.

If the money you are borrowing is federal loans, you can find easier payment options by applying for a direct consolidation loan.

If some or all of your student loans are from private lenders, you may need to use a refinancing program to achieve similar results.

Consolidation is an easier and possibly cheaper way to pay off student loans. You combine all your student loans into one big consolidation loan and use it to pay off all the others. You remain with one payment to one lender each month.

How Double Consolidation Can Help Parent Plus Loan Borrowers

A typical student borrower receives money from the federal loan program each semester of school. This is often from different lenders, so it’s not unusual to end up owing 8-10 separate lenders by the time you graduate. If you continue to take out graduate school loans, add another 4-6 lenders to the mix.

Each of these student loans has its own term, interest rate and payment amount. Keeping track of this type of schedule is difficult and is part of the reason so many people fail. Student loan consolidation is an attractive solution.

Federal loans can be consolidated through a direct loan consolidation program. You consolidate all of your federal student loans into one fixed-rate loan. This rate is calculated by taking the average of the interest rates on all federal loans and rounding to the nearest eighth of a percent.

Although this method does not reduce the interest you pay on federal loans, it preserves all options for repayment and forgiveness. Some lenders allow you to lower your interest rate by making outright payments or by paying on time over a longer period of time.

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Student loan refinancing is similar to a direct loan consolidation program in that you combine all of your student loans into one loan and make one monthly payment, but there are important differences to consider before making your decision.

Refinancing, sometimes called private student loan consolidation, is primarily for personal loans and can only be done through private banks, credit unions or online lenders. If you have borrowed from federal and private programs and want to consolidate the entire package, this can only be done with a private lender.

The biggest difference between refinancing and direct loan consolidation is that with refinancing you negotiate a fixed or variable interest rate that must be lower than what you would pay for each individual loan. Lenders consider whether you have a cosigner when determining your credit score and interest rate.

However, if federal loans are part of your refinance, you will lose payment options and available forgiveness programs, including deferment and forbearance. These last two points can be important if you are facing financial difficulties while paying off your loans.

How To Select The Best Student Loan Repayment Plan

The average college graduate has nearly $8,000 in credit cards. Let us help you with your credit card so you can budget more with your student loans.

There are many good reasons to consolidate through a direct loan consolidation program, not the least of which is foreclosure.

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