If you are reading this article, then you are probably looking for ways to save money on your student loan debt (glad you paid attention to the title). I was in the same position not too long ago, but I have been able to grasp ahold of and effectively manage it without a problem. But, how did I do that? I will tell you in this article.
Hopefully you know me by now, but my name is David! I graduated college with $68,000 in student loan debt. Yes, it is a lot, and yes, I panicked when I received my first statement.
I sat down the moment I received that letter and started to think about how I could manage that debt and save money at the same time. You may think, “save money on your debt, yeah right!” Well long story short, it can be done.
Below, I will go through some of the different ways that I currently save money on my student loan debt. I hope that you will be able to use some of these measures to help you in your journey too.
Don’t Let Debt Control You
The first thing you need to remember is that you should never let debt control you. You control it. It took me a while to figure this out, but once I did, I was able to quickly navigate my way through it and come up with ways to save money.
Make Prepayments on your Loans
The first thing that I did was prepay my student loans, or in other words, paying more than the minimum balance. This means paying extra each month to cut away at the balance faster. My student loan debt is overwhelming, so prepaying is a good way to limit that burden. I do not always have enough money to prepay, but when I do, I make sure that I apply it to my student loans without fail.
Taking advantage of extra, unwarranted income is a great way to keep up prepayments. I applied ALL of my extra money towards my student loan debt. Have money from Christmas or your birthday? How about a tax return? Put this money towards your student loans. A good piece of advice would be to apply that extra money to the loans with higher interest rates. This will save money in the long run!
To help you understand how much money you can save by prepaying, let’s assume you have about $10,000 in debt and you are on a standard 10-year plan at 6.8 percent interest. This means that your monthly payment is about $115 give or take a few bucks. If you paid your loan over the course of the 10-year period, you would not save any money and wind up paying $3,810 in interest. Now, if you simply added $100 to that payment each month, you would save yourself $2,169 and only pay $1,640 in interest.
Refinance your Student Loans
Lastly, I took steps to refinance my student loans. I used to pay a relatively high interest rate on my student loans, but I refinanced my loans to a new interest rate with limited work. Refinancing my student loans was probably the best step that I took. It immediately reduced my monthly payments, and it will save money on interest over the life of my loan.
Here is a quick example to illustrate my point. With a loan of $35,000 at 6.8% interest, the original monthly payment is $310.69, and the total interest paid over the course of the loan term would be $20,924.20. After refinancing, this loan now has an interest rate of 4.25%. The new monthly payment becomes $263.30, and the total interest paid will be about $12,394. This is a savings of $8,530.20 in interest payments alone. I know I could use that extra $8,000. Check your rates with some lenders to see what you can do to your student loans! If it is not what you are looking for, then you have no obligation to work with these lenders.
When it comes to your student loan debt, don’t be afraid to find ways to save money on them. I recommend refinancing your student loans to receive the lowest interest rate possible. Supplement this move with proactive payments. It takes work, but it is entirely doable!