Did you know that there are more than 44 million borrowers who collectively owe $1.5 trillion in Student Loan debt in the U.S. alone? Student debt has become such a major issue that it has made its way to the political forefront. The student debt epidemic is scary, but there are ways that students can make it easier on themselves.
One way college graduates can reduce their loans is through refinancing. There is student loan refinancing which is available if you have a private loan. You can take that loan and refinance it into a loan that may carry a lower interest rate. Currently, there is no refinancing of Federal Loans.
Democrats have been fighting to change the rules around the refinancing of federal loans. They attempted to pass a bill that would allow college graduates to refinance their student loans to one with a lower interest rate. According to this article on the Washington Post, “Republicans said the bill did nothing to reduce borrowing or lower education costs. They cast the legislation as a thinly veiled attempt by Democrats to burnish their populist credibility in an election year.” So for now, there is still no refinancing of federal loans. So, what can students do to pay off their debt?
One thing college graduates can do, is to be sure they are saving a portion of their money to allocate towards paying off loans. There are some banks which offer round up automatic savings that make setting aside money effortless. Students who do have private loans are able to refinance, which is another great way to reduce your debt.
For students who have federal loans, consolidation is an option. Many people believe refinancing and consolidation are the same thing, but that is not the case. This article on U.S. News explains how consolidation works: “Federal consolidation loan interest rates are the weighted average of the interest rates of their underlying loans, rounded up to the nearest one-eighth of a percent. The result is a rate that may be likely lower for some of your previous loans, while also being higher for others. In short, the weighted average means that things mostly just balance out.”
Graduates should also consider options like automatic payments, which often lower your rate by .25 percent. There are also many career options which offer student loan forgiveness! You can find out more about those careers here. Lastly, if your goal is to pay off your student loans as quickly as possible, it is essential to budget your money! Trim your expenses wherever you can, and save whenever possible!
Guest author: Kristen Baker