Student loan payments can be an overwhelming feat for those who are anticipating them as well as those who are already repaying them. This is an especially important topic now seeing as temporary loan relief due to the COVID-19 pandemic is set to end on January 31, 2022. But, repaying student loans doesn’t have to be a daunting task.
There are many ways in which you can relieve some of the stress of student loan payments and even pay them off in advance, so we wanted to outline a few of the most important things to keep in mind as we roll into 2022.
Start getting organized ahead of time.
First and foremost, you should know what you owe. Whether you are soon to graduate, are still in your grace period, or you have begun repayment, it’s important to have all the details straight. This includes how much you owe in total, which loan servicers you need to pay, which of your loans are federal versus private, your minimum monthly payments, and your interest rates.
Get a jump start on repaying student loans. There’s no reason to wait to get things in order until your repayment plan begins. Instead, start looking into plans in advance and create a strategy for your monthly financing knowing that you need to set aside money for student loans each month.
You can even use the grace period to your advantage (typically about the first six months after you leave school) and begin making advance payments against your loans if you’re able. Paying off some of the principal means you will accrue less interest down the road. If you can’t make full payments, you can make interest-only payments during this time to still diminish what you owe.
All of this applies to those who will need to restart loan payments in February 2022 as well — you don’t need to wait until next year to tackle the student loans. Organize all your information now and use the following guidelines to determine how to save money on your loans.
Identify ways to save money that work for you.
There is a long list of ways you can potentially save money on your student loan payments, some of which may work for you while others may not. Consider the following:
- Consolidate or refinance your loans — Consolidating allows you to combine multiple loans or monthly loan payments together at an interest rate that reflects the average rate paid across all of your loans. Refinancing means you are taking out a new loan to pay off the old loans, and if the new loan has a lower interest rate than the average you were paying across the old loans, it could save you some money. In order to refinance, you need good credit or a cosigner.
- Income-driven repayment plans — These plans offer more flexibility for those who need to pay student loans. There are several different plan options that calculate your monthly payment based on your annual income and household size, which in turn can offer more time to repay than the standard 10-year plan.
- Loan forgiveness — There are multiple programs for both federal and private loan forgiveness. Going through Public Service Loan Forgiveness is a popular option, where you can receive student loan forgiveness after making 120 monthly student loan payments (10 years). This is particularly helpful if you plan to extend your loan longer than the standard 10-year repayment plan.
- Make extra payments — There are no penalties for repaying student loans early or paying higher than the monthly minimum. If you instruct your servicer to apply overpayments to your current balance (not the next month’s payment) it can save you a lot of money. As an example, if you owe $10,000 with a 4.5% interest rate, paying an extra $100 every month could allow you to be debt-free more than five years ahead of schedule.
Communicate with your loan servicers.
If you are having difficulty affording your federal or private student loan payments, don’t just ignore them or assume you don’t have any options. You can easily reach out to your loan servicers to discuss your situation and try to create a plan that will help you get back on top of it.
Especially once the temporary loan relief ends and payments restart, the Department of Education has said that many student loan borrowers will have questions about their loans and repayment. They say it is possible that servicers will increase staffing and hours of availability to provide more customer service.
If you find yourself still a little lost in the weeds when it comes to student loans, repayments, or the resuming of payments coming in February, don’t hesitate to reach out to us at Republic Bank of Chicago. We have dedicated bankers and other team members ready to help you navigate the road ahead. You can reach us by phone at 800-526-9127 or read our other posts for more money management tips.