For the past few years, student loans have gotten more and more attention. This is because the cost of higher education has risen dramatically in just a few decades, making it difficult for students to afford a college degree.
Although some students are able to get through college on grants, family contributions and scholarships alone, others must take out thousands of dollars in loans. And unfortunately, many of these students have trouble paying those loans back after graduation.
Student loans may hang over your head for a long time after you are out of school, but it is possible to get assistance easing the burden, helping you lower your student loan payments. Read on to learn about the various ways to access this student loan repayment help.
Learn About Student Loan Refinancing
One of the most popular ways to gain control over a student loan is to take out a refinance plan. When taking advantage of this resource, however, it is important that you look for the lowest student loan refinance rates to make the swap worth your while.
One of the main reasons that graduates choose this option is to access a better interest rate as well as being able to lower their monthly repayments, freeing up cash for other things like investments and savings.
While it is possible to refinance a federal student loan or a private student loan, many financial experts would warn against the former since you will lose access to certain government programs, such as Direct Loan Consolidation.
That being said, your personal situation will depend on what will benefit you the most. If you are in a good financial position and have an emergency fund in place, refinancing your federal loan may become a safer option. You can refinance private student loans at any time in order to access lower interest rates.
Doing your research will provide you with information on all options and will allow you to source the best student loan refinance for you, although at present there are a lot of lenders vying for your attention. For example, RISLA offers an income-based repayment scheme which allows you to make monthly payments in accordance with your income and expenditure.
Understand How Student Loan Consolidation Works
Where federal student loans are concerned, the government offers a program where borrowers can consolidate PLUS loans, Stafford loans and Federal Perkins loans into one loan.
This means that rather than separate repayments, you would only be paying once loan, and that payment may even be lower than your overall loan payments before consolidating. In fact, you may only be eligible for a federal loan consolidation if you will end up paying less than you are now.
Consolidating your student loans can significantly ease your financial burden, at least in the short term. While consolidation may lengthen the term of the loan (meaning you will be paying longer in the long term), you will benefit from a fixed interest rate. This means that you will not be subject to any surprise increases later in the loan term.
It is advisable that if you have both private and federal loans that you do not consolidate these into one but rather do two separate consolidations resulting in two monthly repayments.
Consolidating student loans can be done through one of the many student loan consolidation companies such as Discover who offer excellent rates for private student loan consolidation. They offer variable rates between 2.37% and 6.12% for those with better credit ratings, as well as fixed-rate loans between 3.99% and 7.74%.
Those who have found a job after graduating and are making regular payments on their credit cards and other accounts may find that their credit scores have increased significantly. This would make them eligible for relatively low interest rates.
Another reason that people may choose a student loan debt consolidation is to remove a co-signer from their original loan bringing back freedom for that person.
Learn About Student Loan Deferment
If you are struggling financially and either do not want to consolidate or simply are not able to make any payments on your loans, then deferment may be a viable option.
Student loan deferment is a process in which the student and lender come to an arranged agreement to postpone repayments. You may qualify for loan deferment by meeting certain requirements, such as losing a job, enrolling in graduate school, etc.
It is important to remember that you are able to defer payments for up to three years, but this does not mean that the loan will be written off. In fact, if you have private loans, then it is likely that your interest rate will keep accruing during deferment. If you have subsidized federal student loans, however, then interest will not accrue.
In general, both private and federal loans have specific written requirements that would qualify you for deferment. For this reason, there are different deferment forms you would have to fill out in order to apply for the type of deferment that meets your needs.
Deferring your student loans does not affect your credit score.
Learn About Student Loan Forbearance
Often confused with deferment, student loan forbearance is a different process altogether. Unlike deferment, which has specific requirements, qualifying for student loan forbearance is a more open-ended matter.
You can usually apply for a forbearance for any reason you choose, and it is up to your loan service whether or not to grant it. In general, though, it is usually better to apply for deferment instead, since your interest rate will accrue on both private and federal loans during forbearance.
Additionally, you can typically only put your loans on forbearance for 12 months at a time. This means that student loan forbearance works better for temporary financial issues and is still more beneficial than taking out a whole other loan (such as a personal loan) to pay off your student loans.
There are a variety of ways in which you can apply for a deferment, including the Sallie Mae deferment and the Navient deferment. The latter helps those undergoing cancer treatment or economic hardship, and the former being ideal for those who are entering an internship.
Like deferment, forbearance does not affect your credit score.