Paying off college loans

You’ve done it! You’ve finished your degree and are now on to other challenges. Many college graduates received loans in order to pay for their education. If you’re on a tight budget, it may be difficult to steer any additional cash toward education debt. But you should try to pay it off as early as possible; otherwise it might stick around for a decade or more, which could prevent you from saving enough for retirement. Here are some ideas for paying off your loans:

1. Develop a 3 to 5 year plan to repay your debt. And stick to it. By accounting for this payment in your monthly budget, this payment will become routine. And knowing the date when the debt will be paid off is helpful for most people.
2. Pay off variable private loans first. Because rates can change, it’s wise to pay these loans off as soon as possible.
3. Choose the right federal-student-loan repayment plan. When it comes to Stafford, Perkins, PLUS, and Direct Consolidation loans, there are five repayment options. They range from the standard plan, which requires a minimum payment of $50 every month for up to 10 years, to the new, income-based plan that caps your monthly payments at a “reasonable percentage” of your income (determined by the federal government) and forgives any debt remaining after 25 years. So which schedule is best for you? Aim to put 10 percent of your gross (that is, pretax) income toward your education debt. Go to studentaid.ed.gov to calculate which repayment plan fits your budget.
4. Pay more than the required amount until you have eliminated this debt.
5. Sign up for auto-deductions. You may have already realized that automatic online loan payments make your life easier. What you may not know is that all government and some private lenders charge a slightly lower interest rate (usually 0.25 percent less) if you make your monthly payment this way. Over 25 years of payments, you’ll reduce your repayment period by at least a year.

Contact the Granite team to learn more and get started: Contact the Granite team.

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