And now, let’s address the COVID-19 student loan relief being offered right now and how you should take that into consideration. COVID-19 relief is only for borrowers with federal student loans owned by the U.S. Department of Education. Meaning, not all federal student loans will qualify.
As we touched on before, loans that do qualify for relief under the CARES Act, (and all the subsequent extensions by the former President, former Education Secretary, and current President), are ED-owned loans are in an administrative forbearance until with a 0% interest rate until then. and have an interest rate of 0%. When it comes to determine your repayment strategy, be mindful that this relief is temporary. At some point, your loans will enter repayment.
There are some things you can do to take advantage of this time of relief, especially if you have not been financially impacted by the COVID-19 pandemic.
- Itemize your debt portfolio. Make a list of all the money you owe-credit cards, car loans, personal loans, student loans-and note the current interest rate on your debt. You may want to take this time to tackle some of your high interest debt.
- Review your student loan accounts. Look at your student loan account, to see which of your loans even if they qualify for COVID-19 relief. Look at the amount you owe in principle and the amount you owe in outstanding interest. Even if your loan is on hold, the day it was placed on the administrative forbearance you could payday loans Tustin have had outstanding interest on your loan. Take this time to pay off your outstanding interest.
- Work on lowering your outstanding principal balance on your student loans. The outstanding principal balance is the number used to calculate your daily interest charge for loans that use a simple daily interest formula. If you can start to pay that down, the amount of interest you are charged will be less.
According to , on average it takes around 20 years to be pay off an average debt amount of $32,731. While the road to paying back student loans looks different for everyone, there are tips and tricks to knock out your student loan debt within a timeframe that works for you.
Choose a Repayment Plan
If you have federal student loans, you have several options to choose from. Depending on your repayment goal, you may want to choose a repayment plan with a short or long repayment term. Repayment plans with a shorter term will have larger monthly payments but you’ll pay less overall in total. Conversely, repayment plans with longer terms will have smaller monthly payments but you will pay more overall in total.
The federal student loan program may allow you to choose a 10 30 year repayment plan with a plan which bases your payments on your total outstanding loan amount), or an income-driven repayment plan which will base your payments on your income and not your total debt.
If you have private student loans, chances are you already picked your repayment plan when you initially borrowed the loan. But you can talk to your lender about flexibility with your repayment options, or loan postponement if you get into trouble. If you are looking for a way to change your private student loan repayment plan, you may need to consider private student loan refinance.
Refinancing
Another way to pay off your student loans is to think about refinancing, a method that could afford you a lower interest rate and save you money over the life of a loan. The higher your interest rate, the higher the cost of borrowing per dollar, and that can get pretty expensive when it comes to student loans.