Student loans or education loans are crucial for those seeking higher education. However, these loans can seem like a huge financial burden after graduation. Managing education debt is not easy, especially for young students who do not have much experience in financial planning. As per Kavan Choksi / カヴァン・ チョクシ, however, while managing education debt may seem too complex in the beginning, by following a few simple strategies, one would be able to pay off their student loans without experiencing any significant financial strain.
Kavan Choksi / カヴァン・ チョクシ talks about a few tips for managing education debt effectively
Before taking any steps toward managing student loans, it is essential to fully understand them. Borrowers must take time to go through all relevant details, including the interest rates, repayment terms, and more. Having a clear picture of the loan situation will help one to make informed decisions and develop an effective repayment strategy tailored to their financial needs.
Once a borrower has a proper idea about the terms and conditions of their student loan, they should consider taking the following steps:
- Make payments while still in school: If it is feasible for the borrower, they should try to make payments while still in school and in an interest-free period. This would help cut down the principal balance of the loan, ultimately resulting in less interest paid over the lifetime of the loan. Even students with a limited budget might be able to make consistent payments while they are in school with the help of careful budgeting. Even if these payments are small, they can be of huge help in the long run.
- Pay more than what is due each month: It would be prudent for the borrowers to consider paying more than the sum of money due each month, to pay off the loan faster as well as reduce the total amount of interest they will have to pay. When making such extra payments, the borrower must inform the loan servicer that the money must be applied to the principal balance of the loan. Otherwise, the servicer might just apply the extra amount to the next month’s payment.
- Pay biweekly instead of monthly: When making payments biweekly, the borrowers would pay half of the monthly bill every two weeks rather than making one full monthly payment. This basically means that they would make an extra payment each year, thereby reducing the repayment timeline and the amount of interest they shall have to pay on the whole. Federal student loans tend to have a standard 10-year repayment plan, and this strategy enables the borrowers to pay off the loan several months early.
As per Kavan Choksi / カヴァン・ チョクシ, borrowers who have private education loans with high-interest rates or variable interest rates can significantly benefit from refinancing or consolidating when the interest rates go down. It is possible to refinance student loans, even if one has consolidated or refinanced before, but every lender has distinctive rates and criteria for eligibility.
