Undergraduate students graduate with an average of $30,000 in student loan debt. This amount can feel overwhelming. However, there are several tips for saving money on student loans. You can do it while you are in school and after you graduate.
Saving Money on Student Loans Step 1: Only Borrow What You Need
The first step 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. 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. Looking at your federal loan options is your next step. Federal loans will have to be paid back with interest. However, they 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’ve exhausted all federal aid options and still have college expenses. As with any loan, make sure you understand the terms and conditions.
Saving Money on Student Loans Step 2: Make In-School Payments
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. This means you don’t have to make any payments on your student loans while you’re in school or during your grace period. While it sounds like a good option, interest accrues on your loans during this time. That could mean 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. That means 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.