4 Steps to Ensure You Pay Off Your College Loan
A good number of students go to college on a loan. With the increasing interest rates, some people may be put off to take out educational funding. To help ease yours or your parents’ mind though, here are four steps to helping you manage your student loan debt and not run the risk of having a bad credit rating when you graduate:
KIND OF LOAN
If you want to go to college but you don’t have the money to do so, you can first look to federal student loans. Loans from private companies may be easier, but they are not backed by the government, are riskier and have higher interest rates. If you are considering this kind of funding, you will need to fill out the FAFSA (Free Application for Federal Student Aid).
Choosing the most appropriate repayment plan for your needs may be confusing, but it’s very important. So make sure you take the time to fully analyze the different options. You can get in touch with the Department of Education for information and a computation of your repayment options, which can be:
- Standard – you pay equal monthly payments over a ten-year period.
- Income-driven – monthly payments are treated as a percentage of your income.
LUMP SUM PAYMENTS
This is the fastest way to get rid of your college loan debt. If you make lump sum payments to your loan while still attending school or during the six-month non-repayment period, any payment you make will be directly deducted from the loan principal.
Just because you’re now earning a decent income, you can’t be lax with your spending. Keep in mind that to avoid incurring any more interest into your debt, you need to pay it off as soon as possible. So to ensure that you’ll be able to make the monthly repayments, you have to continue being frugal.
Create a monthly budget, and make it a point to stick to it. Aside from allocating a percentage of your income to your monthly repayments, try trimming anything that you can add towards your debt. Also, find ways to save more money so you can allocate more for you loan.
Lastly, you can also look for ways to earn more money, whether you’re still in college or are starting work already.