Student Loan Hacks: Top Tips for 2020
Borrowing and repaying student loans can often be complicated, not to mention costly. What are some ways you can save money and make life a bit easier? Learn some expert hacks to alleviate the stress of borrowing and repaying student loans.
1. Borrow federal student loans first. If loan debt is unavoidable, consider borrowing federal first, because federal student loans are usually less expensive, easier to qualify for, and have more repayment options than private student loans. Andrew Fiebert, co-founder of Listen Money Matters (a personal finance podcast and blog), reminds students that, “you can borrow between $5,500 to $12,500 from the Federal Direct Loan Program as an undergraduate. Although, you will want to keep the borrowing low, federal loans also provide protection programs. For instance, if you lose your job or go back to school, the federal loan program offers you the ability to defer payments.”
2. Get your student loans forgiven. If you qualify, Federal Public Service Loan Forgiveness programs cancel your remaining Direct Loan debt after you have made 120 qualifying on-time monthly payments (10 years of payments) while working full-time in a public service job.
| What's a Public Service Job? |
| A public service job is defined as: government organizations at any level (federal, state, local, or tribal); AmeriCorps and the Peace Corps; not-for-profit organizations that are tax-exempt under Section 501(c) (3) of the Internal Revenue Code; other types of not-for-profit organizations that provide certain types of qualifying public services. The monthly loan payments must have been made under the standard repayment, income-contingent repayment ICR), income-based repayment (IBR) or pay-as-you-earn repayment (PAYER) Revised Pay As You Earn Repayment Plan (REPAYE Plan) plans. In most cases, the amount forgiven under a Public Student Loan Forgiveness plan is not treated as taxable income. |
3. Refinance your loans. One of the best ways to save money is to get a better interest rate. Refinancing may give you that opportunity. Shop around to compare refinance programs and see what type of rate you may qualify for. Not only can you make life simpler by consolidating multiple student loans into one, but refinancing may help you modify your budget and start tackling longer-term savings goals.
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4. Another benefit of refinancing? You may be eligible to release a cosigner from your private loans. This might just be the mother of all gifts to mom/dad/aunt/uncle or whoever had your back while you were trying to pay for your education.
Side note: The government's Direct Consolidation Loan is also an option for federal loans. It may extend your repayment term and reduce your monthly payment. This particular program is limited to federal loans only. In contrast, refinancing through a private lender gives you the option to merge both private and federal student loans, and may offer considerable savings with a lower interest rate.
5. Look at other options. Before you borrow any type of educational loan, Mark Kantrowitz, Publisher and Vice President of Strategy at Cappex.com, recommends that you “focus on non-loan funding, such as scholarships and education tax benefits.” Additionally, tuition installment plans may be a reasonable alternative to long-term student loan debt.
6. Run a crowdfunding campaign. Crowdfunding is practically universal these days. You can raise funds from friends and family to ask for a graduation gift to help you repay your student loans. Have a compelling story prepared and ask for donations in lieu of traditional gifts. Sites like GoFundMe and Zerobound are good options. Zerobound helps you raise funds toward your student loan debt in exchange for volunteering in the community.
7. Leverage rebate programs like Upromise® to earn cash back towards your student loan. Get paid for things you do every day - like shopping and eating out. The dollar amounts won't look huge at first, but if you link your debit or credit card to your Upromise account, you'll start seeing the dollars add up over time. The best part is you can invite family to join in and the cash back they earn can be applied to your account.
8. Ask your employer to contribute to your student loan debt. Some employers offer either tuition assistance or student loan repayment assistance, or both, as a meaningful benefit to employees. But this is not a universal perk (we wish). According to a Forbes article, approximately 4% of employers have adopted student loan repayment assistance as part of their benefits package. Staples®, PwC, and Aetna are among the growing list of employers offering this perk. Keep in mind that student loan reimbursement is treated as taxable income.
9. Say no to excessive loan amounts. If you and your family do decide to apply for an educational loan, remember not to treat the annual and cumulative limits on student loans as targets. According to Kristen Moon, an independent college counselor and founder of www.MoonPrep.com, “The best way to avoid unmanageable student loan debt is to not take on more loans than necessary.” Every dollar you borrow will cost about two dollars by the time you repay the debt. Budget before you borrow and try to borrow only what you absolutely need.
10. Don't pay only the minimum loan amount. Paying an extra $20 each month on your student loans will save about $906 in total interest repaid (based on a $20,000 loan at 6.8% with a 10-year repayment term). Paying an extra $50 each month on the same loan will save about $1,916 in total interest repaid. Even a small amount of extra money can add up to impressive savings long-term. To estimate your federal student loan repayments, visit: https://www.studentloans.gov/myDirectLoan/repaymentEstimator.action.
11. Sign up for auto-debit. Many lenders offer an interest rate reduction of between 0.25% to 0.50% if you sign up for auto-debit. This is where your monthly loan payment is automatically deducted from your bank account. This can save as much as $300 in interest for every $10,000 borrowed, assuming a 10-year repayment term and as much as $700 on a 20-year repayment term.
12. Pay while you're in school.“One way to minimize student loans is to start paying the interest on unsubsidized loans during the in-school and grace periods to prevent the loan from growing larger,” suggests Marc Roche, co-founder of annuitieshq.com. “A lot of student loans allow borrowers to defer repaying while being in school.” If you're an undergrad and you're lucky enough to only have subsidized loans, the government picks up the tab for the interest that accrues. But if you have unsubsidized loans, or if you're a grad student, the interest that accrues on your federal student loans is your responsibility. Ditto for any private loans. Paying now, even a little bit, helps prevent an excessive amount from being added (capitalized) onto your principal balance after your grace period is over. As Roche points out, “If you do not pay, then interest accrues and is added to the loan. It can increase the loan by 15 to 20% by the time the borrower starts repayment.”
13. Get organized & track your student loans. It is easy to lose track of student loans, especially during the six- or nine-month grace period after graduation. Before your grace period ends, it is time to get organized and plan for repayment. You should start by making a list of all your student loans, including the name, website, telephone number, payment address, and other contact information for the lender and servicer. Also, record the loan ID numbers, the amounts owed, the interest rates, the monthly payment amount, the name of the loan program, and the payment due dates. Use a student loan checklist, to keep track of vital loan information. And go to the National Student Loan Data System (NSLDS) to get a breakdown of your federal student loans and the associated loan servicers. Lastly, get a free credit report from annualcreditreport.com to make sure all your private student loans are accounted for since they do not show up in NSLDS.
14. Get a tax write-off. Take advantage of the student loan interest deduction which allows up to $2,500 in federal and private student loan interest to be deducted as an above-the-line exclusion on federal income tax returns. This deduction can be claimed even if the taxpayer does not itemize.
15. Speak up. If you encounter problems repaying your student loan, notify your lender as soon as possible. There are options to help. You may qualify for a temporary deferment or forbearance. This is also a time to discuss your options for income-driven repayment plans (like Income-Based Repayment and Revised Pay As You Earn). Leveraging a deferment or forbearance, or a modified repayment plan does not hurt your credit score. But being late by even as little as 30 days will impact your score. Remember that the federal student loan program is completely unique in that certain rights are extended to you as a borrower. And one of those rights is entitlement to repayment assistance.
16. Use the formula of total student loan debt < income. The total debt from your student loans at graduation should be less than your expected annual starting salary, ideally, a lot less. If this is the case, you should be able to repay your student loans in ten years or fewer. Shop around for private student loans. Brett Graff, a syndicated lifestyle and financial expert known as the Home Economist recommends that, “If you’ve maxed out your federal loan options, consider a private student loan, Keep in mind that if you qualify for one private loan, you likely qualify for many of them and interest rates can vary greatly. Remember that you’re the customer, so also ask about whether the loan offers some of the benefits that federal loans offer, such as payback that relates to future income.” Kristen Moon suggests that “if a student has medical issues, it might make sense to buy college tuition insurance. This is becoming more and more common, given the high price of tuition. This option could protect students from having to take on more loans to finish college if they end up with an illness and must withdraw.”
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1Rates shown are for the College Ave Undergraduate Loan product and include autopay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation.
2This informational repayment example uses typical loan terms for a freshman borrower who selects the Deferred Repayment Option with a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 8.35% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $179.18 while in the repayment period, for a total amount of payments of $21,501.54. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
3As certified by your school and less any other financial aid you might receive. Minimum $1,000.
Information advertised valid as of 03/01/2023. Variable interest rates may increase after consummation. Approved interest rate will depend on the creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of full principal and interest payments with the shortest available loan term.
- Variable Rates: 5.49% APR - 15.83% APR. Fixed Rates: 4.50% APR - 14.83% APR. Lowest rates shown include 0.25% interest rate discount with auto debit payments.1
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We encourage students and families to start with savings, grants, scholarships, and federal student loans to pay for college. Students and families should evaluate all anticipated monthly loan payments, and how much the student expects to earn in the future, before considering a private student loan.
Loans for Undergraduate & Career Training Students are not intended for graduate students and are subject to credit approval, identity verification, signed loan documents, and school certification. Student must attend a participating school. Student or cosigner must meet the age of majority in their state of residence. Students who are not U.S. citizens or U.S. permanent residents must reside in the U.S., attend school in the U.S., apply with a creditworthy cosigner (who must be a U.S. citizen or U.S. permanent resident), and provide an unexpired government-issued photo ID. Requested loan amount must be at least $1,000.
1Advertised APRs for undergraduate students assume a $10,000 loan to a student who attends school for 4 years and has no prior Sallie Mae-serviced loans. Interest rates for variable rate loans may increase or decrease over the life of the loan based on changes to the 30-day Average Secured Overnight Financing Rate (SOFR) rounded up to the nearest one-eighth of one percent. Advertised variable rates are the starting range of rates and may vary outside of that range over the life of the loan. Interest is charged starting when funds are sent to the school. With the Fixed and Deferred Repayment Options, the interest rate is higher than with the Interest Repayment Option and Unpaid Interest is added to the loan’s Current Principal at the end of the grace/separation period. To receive a 0.25 percentage point interest rate discount, the borrower or cosigner must enroll in auto debit through Sallie Mae. The discount applies only during active repayment for as long as the Current Amount Due or Designated Amount is successfully withdrawn from the authorized bank account each month. It may be suspended during forbearance or deferment.
2In 2021, instant credit decisions were provided to 97% of applicants. Other applications typically received credit decisions in 3 to 5 business days.
3Although we do not charge a penalty or fee if you prepay your loan, any prepayment will be applied as outlined in your promissory note-first to Unpaid Fees and costs, then to Unpaid Interest, and then to Current Principal.
4Based on a comparison of approval rates for Sallie Mae Smart Option Student Loans for Undergraduate Students who applied with a cosigner versus without a cosigner during a rolling 12-month period from October 1, 2020 through September 30, 2021.5 For applications submitted directly to Sallie Mae, loan amount cannot exceed the cost of attendance less financial aid received, as certified by the school. Applications submitted to Sallie Mae through a partner website may be subjected to a lower maximum loan request amount. Miscellaneous personal expenses (such as a laptop) may be included in the cost of attendance for students enrolled at least half-time.
6 Examples of typical costs for a $10,000 Smart Option Loan with the most common fixed rate, fixed repayment option, 6-month separation period, and two disbursements: For a borrower with no prior loans and a 4-year in-school period, it works out to a 10.28% fixed APR, 51 payments of $25.00, 119 payments of $182.67 and one payment of $121.71, for a Total Loan Cost of $23,134.44. For a borrower with $20,000 in prior loans and a 2-year in-school period, it works out to a 10.78% fixed APR, 27 payments of $25.00, 179 payments of $132.53 and one payment of $40.35 for a total loan cost of $24,438.22. Loans that are subject to a $50 minimum principal and interest payment may receive a loan term that is less than 10 years.
Information advertised valid as of 02/27/2023
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This information is for graduate and undergraduate students attending participating degree-granting schools. Borrowers must be U.S. citizens or U.S. permanent residents if the school is located outside of the United States. Non-U.S. citizen borrowers who reside in the U.S. are eligible with a creditworthy cosigner (who must be a U.S. citizen or U.S. permanent resident) and are required to provide an unexpired government-issued photo ID to verify identity. Applications are subject to a requested minimum loan amount of $1,000. Current credit and other eligibility criteria apply.
Actual rate and available repayment terms will vary based on your income. Fixed rates range from 4.70% APR to 14.85% APR (excludes 0.25% Auto Pay discount). Variable rates range from 5.24% APR to 14.65% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan origination loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. Although the rate will vary after you are approved, it will never exceed 36% (the maximum allowable for this loan). Please note, Earnest Private Student Loans are not available in Nevada. Our lowest rates are only available for our most credit qualified borrowers and contain our .25% auto pay discount from a checking or savings account. It is important to note that the 0.25% Auto Pay discount is not available while loan payments are deferred.
1You can take advantage of the Auto Pay interest rate reduction by setting up and maintaining active and automatic ACH withdrawal of your loan payment. The interest rate reduction for Auto Pay will be available only while your loan is enrolled in Auto Pay. Interest rate incentives for utilizing Auto Pay may not be combined with certain private student loan repayment programs that also offer an interest rate reduction. For multi-party loans, only one party may enroll in Auto Pay.
2Nine-month grace period is not available for borrowers who choose our Principal and Interest Repayment plan while in school.
3Earnest does not charge fees for origination, late payments, or prepayments. Florida Stamp Tax: For Florida
residents, Florida documentary stamp tax is required by law, calculated as $0.35 for each $100 (or portion thereof) of the principal loan amount, the amount of which is provided in the Final Disclosure. Lender will add the stamp tax to the principal loan amount. The full amount will be paid directly to the Florida Department of Revenue. Certificate of Registration No. 78-8016373916-1.
4Earnest clients may skip one payment every 12 months. Your first request to skip a payment can be made once you’ve made at least 6 months of consecutive on-time payments, and your loan is in good standing. The interest accrued during the skipped month will result in an increase in your remaining minimum payment. The final payoff date on your loan will be extended by the length of the skipped payment periods. Please be aware that a skipped payment does count toward the forbearance limits. Please note that skipping a payment is not guaranteed and is at Earnest’s discretion. Your monthly payment and total loan cost may increase as a result of postponing your payment and extending your term.
The information provided on this page is updated as of 03/08/2023. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice.
Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 303 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, e-mail us at [email protected], or call 888-601-2801 for more information.
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*UNDERGRADUATE LOANS: Fixed rates from 4.49% to 13.98% annual percentage rate ("APR") (with autopay), variable rates from 4.99% to 13.13% APR (with autopay). GRADUATE LOANS: Fixed rates from 5.25% to 13.60% APR (with autopay), variable rates from 5.49% to 13.07% APR (with autopay). PARENT LOANS: Fixed rates from 6.50% to 13.98% APR (with autopay), variable rates from 6.32% to 13.13% APR (with autopay). For the SoFi variable-rate product, the variable interest rate for a given month is derived by adding a margin to the 30-day average SOFR index, published two business days preceding such calendar month, rounded up to the nearest one hundredth of one percent (0.01% or 0.0001). APRs for variable-rate loans may increase after origination if the SOFR index increases. Interest rates for variable rate loans are capped at 13.95%, unless required to be lower to comply with applicable law. Lowest rates are reserved for the most creditworthy borrowers. If approved for a loan, the interest rate offered will depend on your creditworthiness, the repayment option you select, the term and amount of the loan and other factors, and will be within the ranges of rates listed above. The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. Information current as of 01/30/2023.
Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or other eligible status and meet SoFi's underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, evaluation of your creditworthiness, years of professional experience, income, and a variety of other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Financial Protection and Innovation under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)