Avoid These 10 Student Loan Forgiveness Mistakes

Photo Credit: Getty

No one likes to make a mistake.

When it comes to your student loans, in particular, a mistake can cost you more money.

According to Make Lemonade, there are more than 44 million borrowers who collectively owe $1.5 trillion in student loan debt.

The good news is that when it comes to getting student loan debt under control, the ball is in your court.

So, here are the 5 biggest student loan mistakes of 2018 - so that you don't have to make the same ones.

1. Not paying more than the minimum payment

The minimum payment is just that - the minimum amount you should pay each month.

Remember, however, that interest is always accruing on your principal balance. So paying any amount more than the monthly minimum can reduce the cost of your student loans.

Make Lemonade’s student loan prepayment calculator can show you how much money you can save by paying off your student loans faster each month by paying more than the monthly minimum.

For example, let's assume you have $100,000 of student loan debt at a 8% interest rate with a standard 10-year repayment term.

By paying only $100 extra per month, you can save $5,554 in interest costs and pay off your student loans 1.08 years earlier.

2. Not applying for student loan forgiveness

While student loan forgiveness may not continue as a federal program (in its current form or at all), Public Service Loan Forgiveness and Teacher Student Loan Forgiveness are still available to qualifying individuals.

Public Service Loan Forgiveness is for student loan borrowers with federal student loans enrolled in a federal repayment plan who are employed full-time in an eligible state, local or federal public service job or 501(c)(3) non-profit job who make 120 eligible on-time payments.

Teacher Student Loan Forgiveness is for full-time teachers with five years of teaching experience in a designated elementary or secondary school or educational service agency that serves students from low income families.

3. Not making an extra student loan payment

An extra payment? It may sound counterintuitive, but one of the best strategies to pay off student loans faster is to make an extra payment.

Student loans have no prepayment penalties, so you can pay off student loans anytime.

Here's how it works: in addition to making 12 monthly payments per year, consider an extra payment once every three months for a total of 16 payments per year.

Be sure to inform your student loan servicer in writing to apply any extra payment to your principal balance only (not to next month’s monthly payment) to limit the amount of interest that accrues.

4. Not making a lump-sum student loan payment

Yes, you can make a lump-sum student loan payment toward your student loans. It can be any amount, and a good source may be an annual bonus, tax refund or even a gift from grandma.

For example, let's assume that you have $100,000 in student loans at a 8% interest rate and a 10-year repayment term.

If you make a one-time, lump sum payment of $5,000, you would save $3,029 on your student loans and pay off your student loans 5 months early.

5. Not refinancing student loans

Student loan refinance is often the single best strategy to lower your student loan rate.

When you refinance student loans, you can lower your interest rate on your federal student loans, private student loans or both.

There are multiple lenders who offer interest rates as low as 2.50% - 3.00%, which is substantially lower than federal student loans and in-school private loan interest rates.

Each lender has its own eligibility requirements and underwriting criteria, which may include your credit profile, minimum income, debt-to-income and monthly free cash flow.

To maximize your chances of being approved to refinance student loans, you should apply simultaneously to multiple lenders.

Now that you're in the know, you can avoid these student loans mistakes and hack it like a pro.

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Photo Credit: Getty

No one likes to make a mistake.

When it comes to your student loans, in particular, a mistake can cost you more money.

According to Make Lemonade, there are more than 44 million borrowers who collectively owe $1.5 trillion in student loan debt.

The good news is that when it comes to getting student loan debt under control, the ball is in your court.

So, here are the 5 biggest student loan mistakes of 2018 - so that you don't have to make the same ones.

1. Not paying more than the minimum payment

The minimum payment is just that - the minimum amount you should pay each month.

Remember, however, that interest is always accruing on your principal balance. So paying any amount more than the monthly minimum can reduce the cost of your student loans.

Make Lemonade’s student loan prepayment calculator can show you how much money you can save by paying off your student loans faster each month by paying more than the monthly minimum.

For example, let's assume you have $100,000 of student loan debt at a 8% interest rate with a standard 10-year repayment term.

By paying only $100 extra per month, you can save $5,554 in interest costs and pay off your student loans 1.08 years earlier.

2. Not applying for student loan forgiveness

While student loan forgiveness may not continue as a federal program (in its current form or at all), Public Service Loan Forgiveness and Teacher Student Loan Forgiveness are still available to qualifying individuals.

Public Service Loan Forgiveness is for student loan borrowers with federal student loans enrolled in a federal repayment plan who are employed full-time in an eligible state, local or federal public service job or 501(c)(3) non-profit job who make 120 eligible on-time payments.

Teacher Student Loan Forgiveness is for full-time teachers with five years of teaching experience in a designated elementary or secondary school or educational service agency that serves students from low income families.

3. Not making an extra student loan payment

An extra payment? It may sound counterintuitive, but one of the best strategies to pay off student loans faster is to make an extra payment.

Student loans have no prepayment penalties, so you can pay off student loans anytime.

Here's how it works: in addition to making 12 monthly payments per year, consider an extra payment once every three months for a total of 16 payments per year.

Be sure to inform your student loan servicer in writing to apply any extra payment to your principal balance only (not to next month’s monthly payment) to limit the amount of interest that accrues.

4. Not making a lump-sum student loan payment

Yes, you can make a lump-sum student loan payment toward your student loans. It can be any amount, and a good source may be an annual bonus, tax refund or even a gift from grandma.

For example, let's assume that you have $100,000 in student loans at a 8% interest rate and a 10-year repayment term.

If you make a one-time, lump sum payment of $5,000, you would save $3,029 on your student loans and pay off your student loans 5 months early.

5. Not refinancing student loans

Student loan refinance is often the single best strategy to lower your student loan rate.

When you refinance student loans, you can lower your interest rate on your federal student loans, private student loans or both.

There are multiple lenders who offer interest rates as low as 2.50% - 3.00%, which is substantially lower than federal student loans and in-school private loan interest rates.

Each lender has its own eligibility requirements and underwriting criteria, which may include your credit profile, minimum income, debt-to-income and monthly free cash flow.

To maximize your chances of being approved to refinance student loans, you should apply simultaneously to multiple lenders.

Now that you're in the know, you can avoid these student loans mistakes and hack it like a pro.

Source : https://www.forbes.com/sites/zackfriedman/2018/10/16/student-loans-mistakes/

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Avoid These 10 Student Loan Forgiveness Mistakes

Source:Forbes

Avoid These 10 Student Loan Forgiveness Mistakes