Undergraduate students graduate with an average of $30,000 in student loan debt. This amount can feel overwhelming, but there are several ways to save money on your student loans, both while you are in school and after you graduate.
The first step to saving money on your student loans is to only borrow what you need to cover your college costs. Many students over-borrow and end up with more student loan debt than they are able to pay back after graduation. When reviewing your financial aid award letter, make sure to take full advantage of any free financial aid, such as grants and scholarships, first. Grants and scholarships usually don’t have to be paid back as long as you continue to meet their requirements. However, these forms of financial aid generally won’t cover all of your college costs, so looking at your federal loan options is your next step. Federal loans will have to be paid back, with interest, but usually offer borrowers lower interest rates and more flexible terms. Make sure you take advantage of these options before considering a private student loan. Private student loans are a great option when you have exhausted all of your federal financial aid options and still need money to cover college expenses. As with any loan, make sure you understand the terms and conditions.
The second way to save money on your student loans is to make payments while in school. Most loans will give you a deferred payment option, which means you don’t have to make any payments on your student loans while you’re in school or during your grace period after graduation. While this might sound like a good option, interest will still accrue on your loans during this time, meaning a larger bill at repayment. If you budget to make full principal and interest payments while still in school, you’ll save the most money over the life of the loan, but that isn’t always feasible for everyone. Another great way to save money is to make interest-only payments while in school. This monthly payment will be much less than a full principal and interest payment, but will set you up for success when you get to repayment.
Once you graduate your loans will go into repayment following your grace period, meaning you will start making payments toward your full principal and interest payments until the loans are paid off. Federal loans have several repayment options to fit your budget, but keep in mind the lower your payment and the longer your loan term the more interest you will pay over the life of the loan. Make sure you are aware of and take advantage of any borrower benefits your loan servicer offers, such as a lowered interest rate for auto debit payments.
Refinancing or consolidating your student loans may also be a good option for you.
These are a few of the main ways to save yourself money on your student loans while you’re in school and after you graduate. Knowing your options and paying what you can along the way will set you up for a successful future, free from student loans.