College graduation may have been years ago, yet many of us are still repaying the lofty loans that go along with it. Student loans may just be a fact of life but you can soften the blow of your monthly payments by consolidating multiple loans, decreasing your interest rate or changing plans. Below are a few options to decide which one will work best for you.
Lower your interest rate. It is possible, and very common, for banks to cut interest rates on student loans. Many banks, especially the larger ones, like Sallie Mae, as well as smaller, private companies will cut your interest rate from .25% to 1%. The catch? You must sign up for monthly automatic billing payments. Contact the bank holding your student loans to see how much of a reduction you can get.
Consolidate your loans. Consolidating your loans is a great way to manage your debt and decrease your chances of missing a payment. The Higher Education Act (HEA) offers a loan consolidation program that rolls a borrower’s multiple loans into one consolidated loan at a reduced interest rate. Monthly payments on consolidated loans are usually lower and the period of time you have to repay is also extended. For more information and to see if you qualify, check out http://www.loanconsolidation.ed.gov/.
Check out new payment programs. There are plans available that allow you to change the terms of your loans. Below are the two most popular plans, however, you must qualify for each and be aware that if you choose either of them it will take longer to pay them off.
Graduated repayment loans. With a graduated repayment plan, your monthly payments are lower at the start of your repayment and gradually increase over the life of the loan. You may be eligible to pay only the interest for the first four years. After that you have to catch up on the principal balance by paying higher monthly payments.
Income-sensitive loans. These payments are tied directly to your monthly gross income. Each month you pay between 4% and 25% of your income, as long as you pay at least the interest that accrues each month. Because the loan is paid more slowly you will owe more in interest over the life of the loan.
For more information about any of the above choices, check out Sallie Mae’s website to see if you qualify.
