The number of students taking loans is increasing day by day. They are demanding federal as well as private loans. These companies have high-interest rates which increase the amount of debt with passing time. Students are obliged to pay their remaining debts otherwise they will face high penalties and fines. However, due to the lousy financial conditions during the pandemic, it is nearly impossible for students how to make loan payments possible.
There are a bunch of ways to lower the number of student loans. So do not worry, here we will tell you some useful methods to pay as minimum as possible amount of your student loan.
After completing their education, students have to pay the loans. Obviously, it is hard to get a job and pay the due debts right away after finishing college or university. However, there are some solutions that can lessen the burden on fresh graduate borrowers.
You can apply for IDR (Income-Driven Repayment Plan) which allows you to make payments monthly. Only 10-15% of total gross income has to be paid. You can choose any of these following programs according to your affordability
- Pay As You Earn repayment plan
- Revised pay as you earn repayment plan
- Income-Contingent repayment plan
- Income-based repayment plan
By adopting these plans, you can pay the total amount of student loans monthly within 20 to 25 years of duration. Monthly payments will lessen the burden and make it easy to get rid of your debt. Moreover, you can set your monthly payment rate yourself.
How to Make Loan Payments: Refinance the student loan
If you want to reduce stress on your budget, choose to refinance the loan program. You can receive a loan to pay all the student debt and then pay the refinance loan with less interest rate. Here is the list of loans for which you can get a refinance loan
Refinancing student loans can release your burden, however, it depends on which type of loan is taken in the past. If you have to pay the private loan, it will reduce interest rates. It is beneficial to take refinance loans for private student loans.
Whereas, if you own a federal loan, you will not be eligible for government suspension of loans. Also, you will be ineligible for a student loan forgiveness plan. Moreover, an IDR plan will not get approved if you refinance your debts on federal loans. So, you might think twice before applying for this program.
Some advantages of refinancing your loans are
- Fast payment of loans
- Payments with low interest rates
- Reduce stress on your monthly payments
- Private student loan forgiveness programs
- Will Biden forgive student loans?
- What happens if you don’t repay your education loan?
Automatic payments with discount
You can adopt an automatic payment option to pay student loans. The reason is that some companies offer a discount of over 0.25% on automatic payments. You just have to contact your bank and ask them to turn on automatic payments. This is not a significant method, though, it can lower your debt to some extent.
You should contact your loan service provider and know if discounts are available on automatic payments. In addition, an applicant should meet some of the eligibility criteria to qualify for this option.
Choose a new state to live in: How to make loan payments?
If you are facing problems giving your student loans back, you can move from your current location. Some states in the United States offer better student loan repayment programs for new residents.
You have to apply for the program and wait for the selection. But, remember you should search new and better job in the new state. Also, do your research on living standards and how much it will cost you.
Apart from these loan payment programs, the government is taking serious actions to minimize and suspend student debts. The United States government has announced the suspension of student loans on August 6, 2021. U.S Department of Education stated that students will get relief from paying their debts until January 31, 2022. This pause is a lifeline for students, however, they have to pay their bills after that.
Biden administration is trying to extend the pause on student loan payments, interest, and collections. They said that the pause in payments and this final extension will help give borrowers extra time to plan for the resumption of payments. Moreover, the extension will reduce the risk of delinquency and default after it restarts.
Some Democrats argue that this extension can be taken one step further. They demanded the cancelation of $50,000 of student debts. But Biden only agreed to discharge $10,000 of loans with some specific conditions. So far President Biden has canceled around $1.5 billion worth of debt. Although, this is less than 1% of the total student loans in the United States.
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