Student loans are a common part of student life but can turn tangible and intangible costly when mismanaged. For example, many students default on their student loans only to pay thousands in interest and fees.
If you’re struggling with student loan payments or have questions about the best ways to manage a student loan, here are some tips and financial best practices that will help you do so effectively:
1. Check your grace period
A grace period is a time you have before your student loan balance starts to accrue interest.
When you first graduate, most loans will have a grace period of six months or less. For example, SoFi student loans have a six-month grace period, no fees, and discounts for automated payments.
Suppose your student loan has a longer-than-six-months grace period, like 12 months. It means there is no direct penalty for missing payments in this period. After the grace period, your student loan servicer will start charging interest on all outstanding student balances.
That’s why it makes sense to track monthly payments as best as possible.
2. Set up an automatic payment system that includes your loan servicer
It can be challenging to track which loans are in good standing and which ones need attention when you have multiple loans. Setting up automatic loan repayments is a great way to ensure you pay your loans on time.
You should contact each lender individually and ask them how they want their payments handled. Some lenders will allow you to choose between different options.
For example, some student loan providers offer automatic or manual loan repayments, while others may ask that all payments go through them directly (instead of through a third-party service).
3. Track all payments made and what’s left to pay off
Do not make the common mistake most new graduates make: failing to track all your payments.
Remember that tracking all made and unmade student loan payments lets you know and understand how you’re progressing toward clearing this debt and how much it costs you each month.
Once you start tracking every student loan payment you make or need to make, it will be easier to stay on top of things.
Tracking will also allow you to know when there are payment discrepancies, making it easier to take remedial action to fix things before any real damage to your credit score.
Suggested Read: Information on Loans – Different Types, Rate of Interest and Tenure
4. Pay off high-interest balances first before moving on to other loans
A very effective way to pay off your student loans is by paying off high-interest balances first.
This strategy has several benefits:
- It will save you money in interest payments. If you can pay off high-interest debts before other loans, the less you pay in total interest, and the more you can save on those different loans.
- You’ll have more money available for saving and investing–those two things are essential if you want your financial future to look bright!
5. Consider refinancing student loans before the interest becomes overwhelming
Refinancing your student loans is a good option if you have good credit. It allows you to save money on interest, and if you consolidate multiple loans into one, it may be easier to make payments.
If your student loan lender offers refinancing options through its website or a third-party company, consider taking advantage of this before interest becomes overwhelming.
Refinancing involves taking out a new loan at a lower interest rate than initially offered by the original loan provider. Remember that loan consolidation can help keep monthly payments manageable and less stressful.
6. When in doubt, consult a financial advisor
If managing your student loan feels overwhelming and unmanageable, the best place to start is with your school’s financial aid office. A financial advisor may have information that could make it easier to manage your student loan.
If that doesn’t help, consider contacting your loan servicer or credit counselor. Again, these parties often work directly with lenders and can help you choose a suitable option to relieve any financial pressure caused by student loans.
Conclusion
Badly managed student loans can have far-reaching financial implications like damaging and lowering your credit score.
By implementing the tips and best strategies we discussed, you can have more control over your student loan.
Also Read: Why Personal Finance Is A Skill You Need To Develop As A Student
