The Supreme Court recently made headlines for voiding President Biden’s student loan forgiveness plan. The move comes just weeks after the loan moratorium ended under the debt ceiling deal, meaning millions of borrowers will have to start making payments in the coming months.
Student loan payments have been on hold since the pandemic began more than three years ago, and many borrowers are concerned about how these payments will fit into their budgets.
Luckily, with the right strategies, you can pay off your student loans faster and save money at the same time. Here are three steps to get you started.
1. Always pay more than the minimum amount
If you really can’t afford to pay your loan right now, you may be able to defer your loan. However, deferring payments can keep accruing interest, which can cost you thousands of dollars over time.
Skipping (or delaying) payments also affects your credit score, making it harder and more expensive to get a mortgage, open a credit card, or buy a car. Skipping too many payments can also cause the federal government to withhold payroll and tax refunds to collect the outstanding amount.
Money is tight for many people right now, but do your best to at least minimize your monthly loan repayments. Alternatively, consider an income-based repayment plan that allows you to pay less according to your income. However, keep in mind that the longer it takes to pay off your debt, the longer your interest payments may be.
2. Set up automatic payments to get discounts
Some loan providers offer lower interest rates when you sign up for direct debit and set up automatic payments directly from your bank to your student loan servicer.
Not only does this save you immediate interest, but automatic transfers make it easier to maintain your loan. If you don’t have to think about monthly payments, you don’t have to worry about late payments or incurring late fees.
Autopay also makes it easier to fit the loan into your budget. After a three-year freeze on student loans, it’s common to struggle to find additional funds to pay them off. But when that money is automatically deducted from your bank account, you have no choice but to prioritize payment.
3. Check if you qualify for loan forgiveness
The Supreme Court may have overruled President Biden’s broad loan forgiveness plan, but it’s not the only way to get a loan forgiven.
Exemption plans already exist for employees in certain industries, such as government employees, teachers, and military personnel. Public Service Loan Forgiveness (PSLF) is an option for people working in government or non-profit organizations who may be eligible for loan forgiveness after 10 years of payments.
Another option is the income-driven repayment (IDR) exemption. With an IDR plan, the government will assess your income and family situation and may liquidate the entire loan balance after making a certain number of payments.
With student loan payments coming back soon, now is the time to start planning. With the right strategy, you can make the most of every dollar and pay off your loan as soon as possible.