3 Strategies to Pay Down Student Loan Debt

Paying down student loan debt is something everyone who has the debt should focus on doing quickly. There are a few different strategies to help pay down the student loan debt to keep credit in good standing and save money at the same time. As long as the accounts are kept in good standing, the credit score will not suffer. However, the sooner they are paid off, the sooner they reduce the debt to income ratio which is an essential value when determining whether or not to extend credit. Remember that private loans are handled slightly differently than federal loans. Private loans are extended, based on credit and federal loans are extended based on need.

Begin Repayment during Grace Period

All students have six months between graduation and when the first loan payment is due. If you can start saving money for the payments during this time, or start making payments during this time, you can be up to six payments ahead. This will help you pay off the loan early and keep your credit in good standing. If you are ahead, you can take a forbearance or deferment later if necessary, without having to worry so much about the additional cost on the loans. Your loan servicers will contact you at some point during your grace period to let you know more about the loan terms and payments you will be expected to make, but if you contact them shortly after graduation, you will be ahead of the game. 

Consolidate the Loans

There are many programs that will allow you to consolidate multiple student loans into one loan. The interest rate will be no more than a quarter points higher than the highest interest rate on any loan you already have. It will also reduce your overall monthly debt obligation making it easier to finance a vehicle, get a mortgage, or make more payments toward the principle balance of the loans. Several banks allow for student loan consolidation, but the exact terms and conditions may vary from lender to lender and depend on your particular loan type. 

Avoid Forbearance

Forbearance allows the borrower to stop making payments for a certain amount of time as a result of extenuating circumstances. Many student loans come with up to 60 months of forbearance time to help people when they are in trouble financially but want to keep their credit reports in good standing to avoid more financial damage. When possible though, avoid forbearance because the interest still accumulates, making the loan balance even higher, taking longer to pay off. 

Using any one or combination of these three strategies to pay down student loan debt will help you in the long run. Paying down the debt now is better than holding on to it because no one can predict the future. Having the debt out of the way will help keep your credit in line to get other purchases accomplished, too. Handling student loan debt alongside a mortgage and car payment can be difficult. 

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