What To Know About Paying College Loans Back

Now that you’ve graduated college, you’re probably focused on finding that first job. With many jobs hard to find, paying off your college debt is probably at the bottom of your priority list. However, for those who take paying off their college loans seriously, the burden of being in debt is significantly reduced, building credit and allowing you to stay ahead of the financial curve.

Depending on the type of student loan you have, repayment options are many. Some people are so overwhelmed by the total amount of the debt, that they rarely see the various types of repayment options that are available. A good suggestion is to stay focused on the monthly payment versus the total sum of what you owe. This should make the idea of repayment more manageable.

Depending on how recently you graduated, earning a college degree, and the type of loans you’ve taken out to pay for college, you may qualify for different loan repayment options. One of my personal favorites is student loan consolidation. The benefit here is that you aggregate all of your outstanding loans into a single loan with different payment terms. This may result in a lower interest rate and smaller monthly payment.

If you want to pay off your loan more quickly, reducing the amount you pay significantly over the life of the loan, then follow this tip. Each year, make one additional monthly payment and apply it directly towards the principle amount of the loan. By doing this, you lower the outstanding amount which reduces the significant amount of interest you pay over the initial 10 year loan period. Don’t underestimate the power of one additional payment on an annual basis.

• Before sending your lender any extra money, begin with an open dialog. Do they penalize those who attempt to pay off their loan prior to expiration? In the past this was a common issue. Today, because of increasing defaults and the difficult economy, most lenders are happy to get their money back. If the bank accepts early payment, then do your best to stick to an additional payment each year.

By making an extra payment directly towards principle, you are attacking the loan at its source, reducing interest expense over the life of the loan. When you make your payments, be sure to write on the check, “towards principle” only. When I sent my additional check in for the first time, they applied it towards the following month’s payment, not exactly what I had in mind.

Once you get things rolling, try to save enough to make a full month’s payment each December. In the grand scheme of things, it’s not a lot of money but it will have a significant impact on your repayment schedule and amount. One suggestion is to speak to a representative at your lender to see what types of accelerated repayment programs they offer. Even though this is a great option, it’s not one that is widely publicized.

When thinking about your college debt remember that you want to only focus on the monthly payments with an eye towards finishing early. Don’t let a large amount of debt prevent you from restructuring today. Student loan consolidation is one option, extra principle payments are another. You can pay off your debt and lenders are willing to work with you. Take advantage of available resources and make repayment a habit.

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