How to eliminate private student loan debt? As the cost of education continues to be on the rise, this is one very important question you need to ask yourself before you think of getting a loan from a private firm in regard to financing your education.
How to Eliminate Private Student Loan Debt
There are more than 45 million student loan borrowers currently in the United States, and this figure does not even cover other parts and regions of the world. And with such stats, to say that we have a student loan crisis on our hands would be a very big understatement. And with all of the recent talks regarding student loan forgiveness, every borrower right now is wondering whether they will be impacted.
But we all know that all of that forgiveness talk is about federal student loans, right? So the question here is what about private student loans? Can those ones really be forgiven? Well, it is simple. Before you get really relaxed and invested in the idea that your debt will be disappearing, you should also know that private student loan forgiveness is not really a thing. And even at that, you should keep reading to find out how you can eliminate those private student loan debts of yours without waiting for someone else to do it for you.
Can Private Student Loans Be Forgiven
You should know that government and independent student loan forgiveness programs do not really apply to private student loans. That being said, it means that only federal student loans can be forgiven. But you should know that your private student loan lender may have some kind of relief for borrowers that are in financial distress.
That being said, you just may be able to contact your lender and then request a pause on payment, or a lower interest rate or payment amount. But you should however know that all of these measures in question are temporary and interest on the other hand will continue to accrue during the whole relief period.
5 Ways to Pay Off Your Student Loans Fast
If you are eager to eliminate your student loans, then you should explore these 5 techniques to find the best one that works for you.
Pay More than the Minimum
Paying more than the minimum and then gearing the extra money toward reducing your principal balance is the quickest way to become debt free.
This very strategy in question lowers the remaining amount due and, because interest is calculated based on your remaining balance, reduces the total interest that is owed.
You can easily set up an automatic monthly payment for over the minimum just to ensure that you always pay a little extra. Also you can take the extra money that you earn, such as a year-end bonus, and then apply it to your loan balance. (You however should be sure that your lender is applying your payment to your principal rather than just advancing your due date.)
Refinance Your Student Loans
Refinancing as you should know involves getting a new loan at a lower interest rate. And if you keep payments the same or even increase them, but reduce your interest rate, you will get to pay less in interest in the long term. And more of your payment will therefore go toward reducing the principal balance in question with student loan refinancing.
You give up important protections on federal student loans simply by refinancing such as the ability to make use of an income-driven repayment plan, and then you need to qualify for a new loan that is based on your income and credit score. If you are however eligible, the savings from a lower interest rate can be very substantial.
Make Biweekly Payments
Instead of just paying out your loan monthly when the payment is due, you can instead divide your required payment in two and then pay it every two weeks.
This little trick here does help you to pay off your student loans faster because at the end of the day, you will end up making 26 payments, which will amount to 13 months’ worth of payments instead of the 12 that you would have paid with once-a-month payments.
Pay Off High-Interest Loans First
Some of your student loans as you know may charge interest at a higher rate than others. And if you can pay all those more expensive loans with higher interest rates off first, then you will save more on your total interest.
And while you will need to pay the minimum on every loan that you hold, first putting any extra cash towards your highest-interest loans will help pay them down faster. That will leave the loans with your lower interest rates to accrue interest for a longer period of time, rather than the loans with the high-interest rates on the other hand.
Take Advantage of Interest Rate Reductions
Many student loan servicers in the industry provide a deduction on interest in the event that you get to set up auto-pay. Some lenders also reduce interest after you have made a certain amount of on-time payments.
Reduction of Interest rate programs varies among lenders, however, so you should do well to find out what your options are with getting your lender to reduce your rate. And you should also remember, even a slight interest rate reduction can make a huge difference if you are dealing with $100K in student loan debt.
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