As you start a new year, you don’t have to worry about your student loans anymore. You can seek professional help from companies like ELFI, and see how best you can save up while paying loans. You can also take personal efforts with these few steps, and save up thousands while paying back your loan.
Use Loan Forgiveness programs.
If you’ve been making loan payments for the last ten years, and you work in a qualifying public service job, you can have your debt forgiven. Before applying for a Loan Forgiveness program, you should have made 120 on-time payments. Once you’re selected, the remaining balance on your loan will be scraped off. Public Service Loan Forgiveness programs have strict criteria. It’s essential to know the rules if you want the government to forgive a part of your debt.
Utilize tax deductions.
Tax deductions have helped many students get a deduction of up to $2,500 annually for student loan interests. Choose a program that will save you a massive sum of cash. Some of the tax deduction programs reduce your Adjusted Gross Income (AGI), so you pay less in taxes.
However, tax deductions might not be favorable for a person whose income exceeds $65,000. It’s also not desirable if you have $140,000 in your joint account.
Advantages of Interest Rate Reductions
Many of the student loan services will provide a deduction on interest if the client sets up auto-pay. Some companies also reduce interest after you’ve made a certain number of on-time payments. Because the interest rate reduction program varies among the lenders, you should do your research before seeking this service.
Refinance your student loans.
Refinancing is getting a new loan at a lower interest rate. Getting a lower interest rate will reduce the amount you end up paying in the end. When refinancing your loan, you give up essential protections on federal student loans, such as the ability to use an income-based repayment plan. You qualify for a new loan based on your income and credit score. When you become eligible, the savings from a lower interest rate can be quite low.
Pay more than the minimum.
Paying more than the minimum is another way to save up thousands this year. You can start by putting the extra money toward reducing your principal balance. This is the fastest way to become debt-free. Paying more than the minimum lowers the remaining amount due. Because interest is calculated on your remaining balance, you’ll end up paying fewer amounts in interest.
Start the year by setting up an automatic monthly payment for more than the minimum. You can also use your extra money and apply it to your loan balance.
Borrow federal student loans first.
If you’re considering borrowing a student loan, consider federal student loans. Federal loans are usually less expensive compared to private loans. They are also easier to qualify for and have more repayment options.
Get help through a crowdfunding campaign.
Crowdfunding has become a common practice in many universities. Crowdfunding helps you raise funds from your friends and family as graduation gifts. Some sites help students raise money through crowdfunding. You can get thousands, which will help you pay off some of your student loans.