NEW YORK, Oct. 20, 2022 (GLOBE NEWSWIRE) — For some, student loan debt can feel like a burden they can’t get rid of. But with a plan, borrowers can pay off their loans faster and start feeling relieved from student loan stress. Here are the things to consider and four tips for getting started.
Is prepayment of student loans beneficial?
While there’s no right or wrong answer, there are some things to consider before making the decision to pay off your student loan early. If borrowers have the financial means to do so, paying off their loans early can save them money in the long run. Advance payments can minimize the amount of accrued interest and free up monthly income to allow for greater financial flexibility in the future.
Of course, paying off student loans early also has some downsides. On the one hand, borrowers can forgo certain repayment benefits, such as forbearance or federal loan forgiveness options. Also, if they have multiple loans with different interest rates, it may make more financial sense to focus on paying off the loan with the highest interest rate first.
Ultimately, the best way for borrowers to decide whether to pay off their student loan sooner is to carefully weigh the pros and cons and decide what’s right for their unique financial situation.
Ways to pay off student loans faster
1. Refinance Student Loans – One way to potentially start paying off student loans faster is to refinance them. Student loan refinancing is available for both federal and private student loans. Through refinancing, one could potentially combine their loans and replace the current debt with a new loan offering a lower interest rate to reduce the monthly payment and/or shorten the term. Keep in mind that if one refinances a federal student loan, one will no longer be eligible for existing or future benefits offered by the federal government to federal student loan holders. Please visit www.studentaid.gov for the most up-to-date information on federal student loan benefits. Many lenders offer student loan refinance, so be sure to shop around, compare rates, and fully understand all the terms of the new loan before signing the dotted line.
2. Automate payments – One of the best ways to ensure that student loan payments are always made on time is to set up automatic payments. In this way, the payment will be withdrawn automatically each month from the borrower’s bank account, thus eliminating the risk of late payment and additional penalties.
3. Make Extra Payments When Possible – If borrowers find they have extra money (from a work bonus, for example), they should consider making an extra student loan payment by more than their regular payments. This will help reduce the principal balance and, in turn, reduce the overall amount of interest. Even if it’s only a few hundred dollars, every little bit helps pay off student loans faster.
The bottom line
Paying off student loans early can be a smart financial decision, but it’s not for everyone. Borrowers should carefully consider their unique situation and all of their options before making a decision. Those who decide to go ahead with student loan prepayment can use the tips above to make the process as smooth and stress-free as possible.
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