Some of you may have read my article on tips to take out less in student loans and thought ‘well that doesn’t help me now! I already have student loans’. Tell me about. We have the same best friend. For those of you that have taken out student loans, but are still in school, you can still benefit from the tips if you want to read the article.
For the rest of us who have graduated and are now paying student loans, here are some things I’ve learned on paying them back:
1. Pay the interest while you’re in school.
When we sign up for student loans, we choose between 3 options: federal subsidized/unsubsidized and private loans. I don’t know about you, but when I signed up for loans all I heard was they’re giving me money and didn’t care to research the difference. Apparently, I should have. If you take out a private or federal unsubsidized loan, then the interest starts compiling as soon as they hand you the check.
If you have one of these drowning-up-to-your-eyeballs-in-debt kind of loans, you should start paying the interest ASAP! Especially if you’re still in school and it’s new–you will save yourself so much in the long run. Get in touch with your loan provider to start making payments. If you don’t know who gave you the loan because all you saw were dollar signs when you signed your life away, then get in touch with your financial aid department. They will be able to help you.
2. Look at the loan information now that you’ve started paying.
This is probably an embarrassing story, but I won’t judge you if you don’t judge me. I didn’t look at my loan information until last year…
Did I mention I’ve been paying them for over 5 years? Sure I looked at the full amount owed when I got my 6mth letter to start paying. I may have died a little inside, then never looked at the numbers again other than how much I owed that month. Yeah, you see why it’s embarrassing. I wouldn’t recommend my philosophy of ‘oh well. The loans are there, so just pay them’.
Here’s an example of what I learned when I did look at my loans: I had a private loan that I apparently borrowed for 30 years. The original principal was $8,000 but it had variable interest that started out at 6% and jumped to 10% without any notice or because of any missed/late payments on my end. I had been paying on it for 5yrs and I still owed over $10,000 in order to pay it off!
Don’t be a me–look at your loan info.
3. Consider refinancing or bundling your loans.
My payment when I started paying my loans back, was $950. I paid that for 2yrs and lived at home without any rent. Obviously that wasn’t something that I could sustain, so I had to figure out how to lower my payment in order to move out of my parents’ home.
My solution: Refinancing my loans.
I bundled my federal loans into one and made them income restricted through their website. This lengthened the loan by twice it’s lifetime and I am going to end up paying more interest. But at least I have had the luxury of my own place. Although this was a benefit on a personal level, eliminating my debt was not a benefit to this decision (Pros and cons to everything, am I right?).
Remember that private loan with 10% interest? Everyone told me that you can’t refinance a private loan, but I found a site called Lendkey that does just that. It has many offers from different banks and credit unions to choose from based on the information you put in. Now, not only did I shorten the life of the loan, but I cut my interest in half and my payment stays the same! Maybe my previous loan was that crazy, but I thought the site did a good job.
However, since I’m not an expert in student loans (Check out my disclaimer here), I have attached some sites that I have used for information to help you in your decision on what to do with your student loans. It’s also always advisable to talk with a financial planner or adviser before making major decisions on what’s right for you.