If you happen to be one of the lucky ones who still has enough extra income to help make it through your studies, here are some tips for how to pay off that student loan before you graduate. Keep reading and learn what steps to take in order to repay your loans fast and free up credit so you can focus on your education. Also, follow our post on how to save money while you attend university or any other major you’d like to pursue.
1. Start a budget
The first step towards paying off your student loans is learning about the best ways to save money. This will enable you to cut down on utility costs and keep track of everything that you spend every month. It will also give you an idea of exactly where your monthly expenses and savings stand. These details should be recorded in your bank account or something similar as well to ensure all financial records are kept. For example, if you work from home at times, then having an email account with them on file will be crucial in tracking your daily activities. Once you have figured out how much money you have in each category, you can use these numbers to determine whether there are any areas in which you can cut back even more. You can do this by figuring out how much it would cost to buy things for a certain amount of money, such as electricity or gas. In terms of utility bills, this process might take some effort when you haven’t been using your internet connection regularly. However, once your bill comes due, you may not even notice as long as you plan ahead and shop around for plans that won’t break the bank. With regards to saving money, try to get creative with items that could potentially save you money by pairing them with items that you already have (such as going vegetarian). Another option is to go online with banking services and find sites that offer deals and/or offers that have lower interest rates. The point of doing this is to create enough leverage to negotiate better deal terms with a lender. Of course, the key is to think creatively about any deal you come across and don’t be afraid to ask questions. This way, you may be able to avoid wasting resources and time that would’ve otherwise been spent shopping around. Finally, it’s important to consider whether you’ll be able to afford tuition fees, textbooks, or other college-related expenses. Make sure that these categories are a priority when looking into how you and your family can put together a budget.
2. Review your credit score
Once you know how you may have handled your finances in recent months, you’ll need to review your credit score to see whether you got your debt paid off easily when compared to others. You can check your credit score with NerdWallet’s Credit Score Check. After you’ve done a quick calculation of your overall creditworthiness, you can compare that number with specific information for various loan types. Depending on your situation, it may be required to apply for federal, state, local, or private student loans before you graduate. Because you’re unlikely to receive aid in most cases, you’ll typically only want to take cash advances with unsecured loans like auto loans, personal loans, business loans, mortgages, etc. However, if you took out a mortgage, that means you weren’t eligible for government loans. This means that you’ll also have to take out unsecured student loans in order to finance your education. Here’s a rundown on all three kinds of loans you’ll likely have to pay off.
State Grants
Federal Loans
Federal Loans Apply Federal grants through a variety of sources such as USDA, U.S. Department of Education, and several states’ department of education. State-provided, private grants are sometimes available as well. Private loans tend to be issued by banks and credit unions. Most lenders require borrowers to show proof of income in addition to showing good personal credit. Some programs also require that you submit information about whether the grant was granted and if you’d like to apply again. There are many programs that cover both general education and healthcare; however, just because they provide funding doesn’t mean that they’re always a good fit for you. Be sure to read up on the program specifics, especially the eligibility requirements. You can also search for private student loans near me by entering a zip code and selecting “credit card” or “loans.”
3. Learn the right repayment strategies
Now that you know how much money you’ll likely owe, you’ll have to figure out a strategy to get rid of the rest in order to save as little money as possible. Unlike personal loans, student loans don’t usually accrue interest over a fixed period of time. Instead, they generally last until you graduate, after which they are forgiven. So, what exactly does this mean? When you come to think about it, let’s say you owe $10,000 toward your loan, for instance. At the end of the year, your student loan is $9,000, but you have received about half of what you were supposed to get, meaning you have a balance of nearly $4,000. All told, you owe roughly $4,500 in total. Now that you’ve decided how you’re going to repay the loan, you’ll either:
Pay off your entire balance before graduation so your new principal isn’t taken away
Pay an early payoff on your outstanding balances every few months to bring the total down closer to zero (e.g. monthly payments) – This gives you an opportunity to build up credit before you leave school, but at a higher cost than an earlier payoff. As a result, it’s generally recommended that you choose this option only if you’ve been taking regular payment breaks during the past several years; otherwise, it may hurt your chances of getting approved for any type of financing later. While it might seem like you don’t have any options left right now, remember that most lenders will let you borrow up to 5 years from today’s date. Remember, a large portion of your funds will be used to repay your lender’s interests, unless it is secured.
Pay early interest if your loan is term-limited
Pay low-interest debts quickly, such as rent, utilities, car payments, etc., as soon as possible
Consider refinancing or consolidating your loans
If you have multiple loans to pay off, consider consolidating them into a single loan or paying as much as you can within the shortest window possible. Doing this will reduce costs more significantly than trying to tackle everything at once; instead, a consolidated loan will usually allow you to pay off portions of at least two different loans faster and at a much slower pace. Additionally, you’ll save money as it allows you to get pre-approved for any kind of financing more quickly. Just remember that some loans will charge more fees than others depending on your payment schedule.
4. Save up for retirement
One reason why paying down your student loans before you graduate might be advantageous is that it makes it easier to put money aside for retirement. Even if your salary drops or you quit your job to study full-time, the fact remains that you cannot earn enough money to support yourself and meet basic living expenses. Thus, your future self will depend on this money. That said, you’ll want to make sure that you start saving some part of your paycheck sooner rather than later. And while a 401(k) may cover most of this cost, it’s still worth considering since you can contribute up to $5,500 toward a qualified retirement fund. Moreover, you could increase contributions by investing more in a Roth IRA.
5. Consider setting up emergency funds
If you aren’t careful, you might end up spending more than you planned. Having some liquidity can be incredibly helpful in case circumstances such as losing your job or being unable to cover unexpected expenses arise. Aside from that, you still want to make sure that you have enough money to pay for emergencies that might occur when you’re without a job or in need of medical treatment. It’s also wise to invest in some sort of insurance coverage to help minimize risks when unexpected situations arise. One way to go about this is purchasing life insurance policies that include death benefits. Alternatively, you can set up a high-yield annuity with a company that specializes in providing protection against certain health conditions, such as cancer, heart disease, among others. Since these products are backed by investments, this enables you to maximize investment returns in exchange for minimizing your risk of suffering through illness. On top of these measures, you’d want to do your research on annuities. Look for companies that provide low-cost and flexible plans. They’re often cheaper than traditional life insurance policies, which means that you can save money if something goes wrong and need insurance.
6. Explore credits
If you’re hoping to save money and pay off your student loans, you’ll also need to think about alternative ways of repaying them. An excellent option is to qualify for additional educational loans with less stringent terms than standard loans. Not only will these programs provide you with the needed funds, but you’ll also enjoy the perks of applying to these courses with no prior experience, which allows you to save money and gain knowledge in the field before you graduate. Furthermore, once you graduate, you’ll find that some schools offer generous scholarships and fellowships as well. These programs can typically cover most coursework as long as you make some progress toward achieving your desired degree. Otherwise, you can look into short-term certificates to assist you in your undergraduate career. Although a certificate will cost you quite a bit more, it’ll be helpful in helping you advance more quickly in your chosen fields. Lastly, it provides you the ability to learn about your career options without the stress of trying to transfer credits. A credential is another useful tool that’s easy to complete online without specialized skills.