few years, a work colleague the mine suddenly proclaimed, "well that can not be true! "
assuming of course she meant anything to do with work, some of us turned around and asked what she was talking about." I just do the math and think my husband and I paid $ 50,000 in interest alone on our student loans, "lamented it.
she had not made the miscalculation. she and her husband had indeed already paid $ 50,000 to their interests lenders only and they do not.
Needless to say, the interest rates are one of the silent killers regarding the debt repayment.
so, what is a recent graduate to do?
There are three major hacks to pay student loan debt more quickly and with less interest.
Hack # 1: the biweekly payments
instead of making a single monthly payment, consider splitting your money in half. Make two monthly payments can help erode interest.
How does it work?
Say you have $ 45,000 in loan debt student at an interest rate of 5.5%. You pay $ 500 per month on your loans. At this rate, it will take you a little less than 10 years (117 months) and cost $ 13,206.79 in interest.
Now, instead of making one payment a month to $ 500, you make two payments of $ 250. It is always the same amount per month, but you're just split.
The magic comes because there are 52 weeks in a year, so you'll make 26 biweekly payments, which then translates into 13 full payments per year instead of 12.
If you get paid twice a week at work, you may remember that two months a year, you get 3 checks instead of two. So do not worry, this payment will not leave you scrambling for more money.
So how could the bi-weekly method save you?
Using the above scenario, you would pay $ 11,603.69 in interest and be repaid in less than 9 years (105 months).
This is a year of your life and 03.10 $ in your pocket while bimonthly payments and squeeze in one full payment for each additional year
Hack No. 2 :. interest payments only in the grace period
graduates latest ignore student loans for as long as possible (usually six months after graduation). But your lenders are not ignoring you.
In fact, many loans accrue interest during the grace period. This interest and capital (is added to the principal) when you start to make payments.
Instead of completely ignore your student loans for six months, you can make payments of interest only to keep the interest of capitalizing on your capital and your resulting minimum due.
you may think, "Who cares if I pay now or then" Well, the more your principal balance, the more interest you will pay overtime
?. right now, you have a loan of $ 10,000 at an interest rate of 5.0%. are you planning to pay $ 0 per month after the grace period. during the grace period, you have accumulated $ 250 in interests, so now you start making payments, it is about $ 10.250 worth of loans. at your $ 0 monthly strategy, you repay 11,557.95 $ in 58 months.
But if you had made payments of interest only?
instead of letting the interest return, you made a monthly payment of $ 41.67 on your loans during the grace period . once the refund has started, you dutifully made the payment of $ 0.
It took you 57 months to pay off the debt and cost you 11240.71 $ 1140.73 + $ 250.02 the interest payment = $.
You saved $ 67.22 by making a payment of interest only.
This may not seem important, but imagine if you are dealing with debt is $ 60,000 instead of $ 10,000. The amount saved is growing rapidly
Bonus Hack :.
loanssubsidized federal Stafford loans and Perkins often do not take advantage of interest in a grace period, so that all payments you make during your grace period will 100% capital.
it is a great move to make payments and erode the principal while he is at an interest rate of 0%.
Hack # 3 :. Specify where the extra money Goes
latest hack is incredibly simple and involves no mathematics, just the need to contact your loan service
There may come a time in your student the repayment of the loan if you pay more than your minimum. Maybe you have $ 20 per month, but you round and pay $ 300 a month each payment.
Or maybe you got a year-end bonus at work and want to clear $ 1,500 for your student loans.
When you make more than your minimum payment, you must tell your lender that the money not intend to go toward future payments.
Lenders pull a sneaky kick to keep you erode your capital by placing additional money on future payments and therefore the interest rather than the principal debt.
Be sure your money goes towards the principal debt so you can shave the time and interest of your refund.
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