Tag Archives: student loans

Optimizing Your Student Debt

4 Mar

Optimizing Your Student Debt(This is a post by Kaitlin Butler of CommonBond. I’ve recently looked for ways to optimize the student loan debt I have and she graciously offered some thoughts. I like the idea of maximizing the return on education investment she mentions below. Please leave your feedback in the comments. ~Mike)

Optimizing Your Student Debt

By Kaitlin Butler, CommonBond

There’s no “one size fits all” repayment strategy for the millions of Americans tackling student debt. Like nearly everything else in personal finance, it’s up to you to identify the best way to optimize your debt based on your financial goals and needs, and we’re here to help. Here’s what you need to know to take control of your student loans and maximize the return on the investment you made in your education, starting today.

The government offers more repayment plans; private lenders offer more savings.

Federal student loans come with a robust set of repayment options. The federal government offers repayment plans that private lenders can’t offer, including Income-Based Repayment and even Public Service Loan Forgiveness. (See the full list of options here.) However, these repayment plans don’t make sense for all borrowers. If you’re not in the public sector or you’re a high earner, you may not be able to take advantage of many of these options. If that’s the case, consider student loan refinancing, which will help you get a lower interest rate that will help you start saving quickly.

Refinancing gives you a second chance at picking your ideal student loan.

When you refinance, you trade out your old student loan for a new loan, giving you a second chance to customize your debt repayment plan. Besides applying for a lower interest rate alone, you can also choose a new loan type – fixed, variable, or hybrid – and loan term, typically from 5 to 20 years. That means that you can choose a loan type tailored to your own risk tolerance and long- and medium-term goals. (This blog post helps you find the right student loan for your personal situation, and there are no fees when you refinance through CommonBond.)

Reamortizing helps you pay off your loans faster and lowers your monthly payment.

If you save up a lump sum payment – like an annual bonus – that you plan to put towards your debt, make it go the extra mile with reamortization. This is when you make a significant extra payment and then reset your monthly loan payment schedule based on that big drop in your balance. To take advantage of this, ask your lender if you can reamortize (and if there’s a limit to how many times you can do so on one loan). When you reamortize you’ll reduce your loan balance and have lower monthly payments each month based on this new balance.

One final tip for anyone with loans? Make sure you’re signed up for autopay, also known as ACH, where your loan payments are made automatically out of your checking account. Lenders will often offer you a 0.25% interest rate discount just for signing up, and you can rest easy, knowing you’ll never miss a payment.

Kaitlin is Content Manager at CommonBond, a student lending platform that provides a better student loan experience through lower rates, exceptional customer service, and technology. Her articles have appeared on Lifehacker, the Huffington Post, Yahoo!Finance, and more. 

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