The value of higher education continues to rise as the job market becomes increasingly more competitive. While many students strive to attend university, inflation and growing tuition costs make it challenging for these dreams to become a reality. The U.S. spends more on college tuition than any other country in the world, with roughly 70% of American students turning towards federal and private loan options. Whichever option you choose depends heavily on your circumstances. Unfortunately, student loans often create large sums of debt that students carry on their shoulders for many years, contributing to the American debt crisis. For most, debt is simply a fact of life, so knowing how to organize, save for, and pay off your student debt is a must.
Live Frugally
It may seem obvious, but being frugal can have a tremendous impact on paying off what you owe. It’s useful to adjust your lifestyle around your regular, necessary payments such as car insurance, phone bills, rent/mortgage, and student loan debt. When creating a detailed spending plan, sometimes sacrifices should be made. Budgeting options such as eating out less, searching for on-sale items, and refraining from unnecessary purchases, may seem insignificant when compared to thousands of dollars of bills, but they do add up. For example, creating weekly meal plans can save you extra money (and time) throughout the week. Meal prepping for the week based on a fixed shopping list will help you avoid popping into the store every few days for more items. If you live in an easily walkable environment, try heading to your destination on foot or by bike to save money on gas and possible maintenance repairs. Better for the environment and better for your wallet! Having residual funds in your budget each month can allow you to pay more than your minimum payment, which can ultimately speed up the process and help you complete your repayment faster.
Choose the Right Repayment Plan
An essential strategy in paying off student loans is educating yourself on which plans and programs work best for you. It would help to consider making a thoughtful and organized assessment of your lifestyle and career goals. Do you want to pay more each month and be done with your payments sooner? Or would you like smaller monthly payments stretched out over time? Choosing the right repayment plan is one of the first steps you can take to feel more confident. In addition to a standard plan, the federal government offers several repayment plans consisting of income-based, income-contingent, Pay As You Earn (PAYE), and Revised Pay as You Earn (REPAYE). These plans are feasible options if you have an accurate estimation of your current or planned income. Depending on the organization, private lenders also offer a variety of repayment plans of varying lengths. Every person is unique, and your repayment plan can be too!
Refinancing
Similar to refinancing a home or vehicle, refinancing your student loans is a viable option for some borrowers and depends on whether they are federal or private. While there is a promising potential for savings, one of the most considerable risks when refinancing federal loans is losing federal loan protections. The government provides protections such as loan forgiveness, forbearance, and economic hardship deferment. These protections can help form a more secure safety net if you find yourself in a dire financial situation. Contrastingly, refinancing private loans tends to be a less risky process. Depending on what you qualify for, refinancing private loans can decrease your interest rate and alter the repayment schedule. Private lenders also allow borrowers to refinance as often as needed when interest rates drop, or your credit score improves.
At Premier Source FCU, we want the best for you or your student. We recommend that students and families start with savings, grants, scholarships, and federal student loans to pay for college. If you’ve decided that a private loan is right for you, we’re here to help. Feel free to check out our variety of loan options to help finance and support your education!
These loans are made by Sallie Mae Bank or a lender partner. Premier Source Federal Credit Union is not the creditor for these loans and is compensated by Sallie Mae for the referral of loan customers.