Ways You Can Reduce Your Student Loans

Many people struggle with student debt in the United States. If you’re not lucky enough to find a good-paying job right after graduating and don’t have rich relatives supporting you or other sources of income, you may bear the weight of your student loan for a long time.

But if you’re financially savvy, you can take advantage of some of the available social and financial programs to pay off your student debt more easily and quickly, reducing the amount of interest accrued over time. You can refinance your loan at a lower interest rate to reduce your monthly payment, explore debt forgiveness programs, or get a deal to pay as you earn – not a flat monthly rate.

To help you tackle your debt, let’s look into all these alternatives in more detail.

Refinancing

This option depends on a number of factors that have to do with your current financial condition, including your income and credit rating. You can access student loan refinancing with lower interest rates if you have a decent-paying job and a good credit rating. Some companies also consider your earning potential based on your college degree.

However, you need to do your due diligence when signing up for refinancing. Study the terms, interest rates and how the company calculates their annual percentage rate (fixed or variable). If you have multiple student loans, you can bundle them into a consolidated loan to make them easier to manage and refinance.

Take the time to find companies that reduce – not increase – your financial burden. In some cases, your may pay lower monthly rates, but still end up paying a higher APR. If you’re struggling to find a good refinancing program, you can try enlisting the help of a cosigner.

Public Service Loan Forgiveness

Several public institutions offer federal direct loan forgiveness programs, including nonprofits, government, hospitals and schools. In exchange for loan forgiveness, you’re normally required to commit to certain service-based occupations.

For instance, branches of the military, including the army and navy, run programs that cover a certain percentage of students’ debt for every year of service. Some nonprofits also offer student debt forgiveness to attract talent needed to run their charity in parts of the world.

If you dig a little deeper – especially if you’re having difficulty deciding what jobs to apply for post-graduation – you may find a program with favorable terms.

Pay-As-You-Earn Payment Plan

If you can’t find a refinancing plan or forgiveness program with favorable conditions, then you can explore a Pay-As-You-Earn (PAYE) plan. This option not only helps reduce your monthly bills, but it has a maximum lifespan of 20 years, after which any outstanding debt is usually written off.

However, PAYE is only only for student loans given out as part of the Direct Loan program. If you don’t qualify, there are other similar income-based repayment plans you can explore like the Income-Based-Repayment (IBR). IBR comes with lower eligibility requirements compared to PAYE. It also covers some aspects of student loans not covered by PAYE, such as private student loans and certain loans given to parents. IBR forgives your student’s loan after 300 payments or 25 years of repayment.

Consider Your Options

With these options, you can enjoy your life and career without the weight of unmanageable student debt. You’ll most likely avoid hefty monthly bills that make it difficult to maintain a good credit score. It’s also a good idea to search online for advice, as there are many resources on how to pay down and “hack” student debt for young people.

Look for more information on each of the options discussed above and compare your options. Spending the time and energy to bring down your debt will have a huge impact on your wellbeing.