College Student Loans Blog

If you search online you will find an abundance of information about paying off your college loans. However, they are not necessarily geared toward your specific situation. Just as you did when you secured the initial funding for college, researching the best payoff solution is the way to maximize your money. There are many ways to accomplish your goal. Here are some general tips, though, to keep in mind when you are planning your strategy.

First of all, start a detailed spreadsheet that includes all of your loans, with corresponding interest rates, monthly payments, and expected date of payoff. Then add in all sources of income, all expenses, and any savings and retirement accounts you have available.

The next step is to look at options to lower the overall interest rate you are paying on the borrowed money. Are you able to consolidate for a lower combined rate? This may not be an option for some private loans and/or Sallie Mae loans. If there is the option to consolidate, go for it. It will not raise your interest rate, and will not likely lower it but it will allow you to put the payments all together to one lender, therefore reducing the chance of missing or late payments that will harm your credit score.

Along the same lines, look at all lines of credit in your name. Can you transfer balances to the lowest interest rate? If possible, reduce the number of credit lines you have open, and use the remaining lines of credit sparingly.

Once you have reduced the number of payments you need to make each month, and the amount of interest you are paying overall, begin to look at your living expenses. Consider what expenses are truly needed (food, rent, mortgage, etc.) and what are luxury items (cable television, lunches at restaurants, etc.) Sometimes simply living without cable television for a year can reduce the overall amount you will pay on some loans because you will pay them off completely a little bit sooner.

At this point, begin to design a payoff plan. This means to determine the minimum monthly payment for each loan, and then add what is available in your budget to the loan with the highest interest rate. Pay off the one with the highest rate first, then move to the next highest rate. Determine also, which loans have the interest compounded most frequently. If the loan is the second highest interest rate, but is compounded quarterly, it may be the one you will end up paying the most in the long run.

If this all seems too complicated, as it does to many of us, contact a financial advisor. Your college many have someone available, or will know some reliable people to recommend. Most importantly, though, make a long term plan that has some flexibility for unforeseen circumstances. Loans can be paid off with planning and determination!