The Best Way to Repay Student Loans

When you set up school loans, repayment seems a long way off, but eventually the day of reckoning arrives. It is extremely important to make the monthly payments because school loans are considered debt. Failure to pay timely will affect your credit rating. Even if you were to declare bankruptcy, it is difficult to get these loans forgiven. The best way to repay depends upon your income, occupation, lender and your type of loan.

Instructions

1

Search for forgiveness programs. If you teach in a low-income area for five consecutive years, you can receive up to $5,000 in loan forgiveness from the Teachers Loan Forgiveness program.

2

Contact your lender to see if you are eligible for automatic monthly payments. Many like Sallie Mae offer the option of automatic debit; thus, your monthly payment is deducted from your bank account. Borrowers participating in this program can be eligible for an interest rate deduction. Another advantage is the automatic feature. No longer will you have to remember to make each payment. On your credit report it will show that you have been making your payments on time, so your credit score will receive a boost.

3

Apply for a forbearance or deferment if you are experiencing financial hardship or are unemployed. This will temporarily postpone payments. Ultimately, it is important to choose the repayment option most suitable for your circumstances. Many lenders offer extended payment plans and other arrangements like interest-only payments for a specific time period. Other plans are based upon income; thus, the monthly payment becomes more managable. However, remember that any plan reducing the monthly payment will increase the length of the loan. Therefore, you will pay more in the long run. Check your lender's website to find an on-line calculator to see how much you will pay over the life of the loan.

4

Pay extra. There is usually no penalty for overpaying your monthly amount. That will lower the amount of interest over the life of the loan and decrease principal. If you are especially anxious to retire your debt, consider getting a part-time job to generate more income.