Feb 07, 2021
Even though most student loans allow students to defer payments until after graduation, the interest on the loan continues to accrue. While deferring payments can be tempting for those on a tight budget, making monthly payments – even a small payment amount – can help offset the interest that accrues and lower the overall cost of your loan. Here are some tips to get you started.
Even if you don't have much to budget, getting into the habit of setting (and observing) spending limits will help you find opportunities to put extra money toward your student loan(s). Set a budget for eating out, entertainment, gifts and shopping and stick to it. Track your spending to find areas where you can cut back and save. For example, that $4.50 latte may seem like an innocent purchase until you realize you bought 10, or $45 worth, last month.
When your study load is already packed, you may not have time to commit 20-30 hours a week to a part-time job. But perhaps you have 5-10 hours each week, or free time on the weekends. Earning an extra $100-$300 a week can help offset extra college costs and go toward loan repayment. Look for side jobs that allow you to set your own hours, such as:
Set up automatic payments so that money is funneled directly from your bank account to your loan payment, thereby eliminating the chance that you'll spend your funds elsewhere. Even paying as little as $25 a month can make a difference and reduce your overall loan cost.
Not all loans are created equal, so it makes sense to prioritize. It's often best to begin paying off private student loans before federal loans. The latter generally have more flexible repayment options.
You can also start by paying more toward the loan with the highest interest rate. This will allow you to save the most money, since loans with higher rates ultimately increase your total loan cost.
Each lender has its own rules for repaying loans, so check with your school's financial aid office for more information. Putting money toward your loan while still in school might feel like a balancing act, but it will be worth it if you can graduate with less debt.