Dreading your next student loan payment? You’re not alone. The fact is there are more than 40 million Americans face the same struggle – mostly because they’re doing it wrong.
It can take a lot of courage to click ”submit” and shell out hundreds of dollars each month for what feels like a car loan without the car. Fortunately, if you understand some basic tenants of student lending, you can eliminate your loans and get closer to the home, car, or other big life move you feel like you can’t afford.
Here are five reasons you shouldn’t simply “just pay” your student loans and tips on how to save hundreds of dollars and shave years off of your repayment.
1. YOUR REPAYMENT PROGRAM IS COSTING YOU MORE
If you don’t know which repayment program you’re in, you’re probably making a big mistake. Recent reports show that more than 80 percent of student loan borrowers are locked into default repayment options that could be costing them more than an extra $250 each month.
Why is this? The default student loan repayment option isn’t necessarily your best option. Unfortunately your servicer (the company you make payments to) is under no obligation to tell you that you could be saving hundreds each month or thousands each year.
If you’re struggling to make payments or need to free up cash in your budget, be sure to check your repayment plan or call your servicer to find out if there are options to lower your payment based on income or financial hardship.
2. YOUR INTEREST COULD BE YOUR ENEMY (OR YOUR CASH SAVIOR)
High on the list of “need-to-knows” is the interest rate of your different loans. Why? Each loan interest rate can affect how you should pay, especially if you’re paying extra for a faster payoff.
If you’re paying the least on your highest interest rate loans, you could miss out on the chance to cut your repayment time by years. It’s important to know which of your loans will cost you the most over time and how to save time and cash over the long run. You can use a tool like Student Loan Genius Advisor to explore.
3. YOUR PAYMENTS MAY DISAPPEAR
Paying your loans on time is great thing to do…unless your payments aren’t ending up in the right place. Each year, the federal government and private loan companies have the opportunity to change your “servicer,” the company that receives and processes your payments. If your student loan servicer changes and you miss the notice, there’s a chance that your payment may not get credited to your account for a while.
Our Genius Advisor tool helps you avoid disappearing payments or ensures you aren’t sending money to a fraudulent student loan company.
4. LOAN DIFFERENCES CAN DELAY REPAYMENT.
A loan is not just a loan. If you’re not paying attention to the details like repayment terms, interest rates, or other details, you could be wasting your time and money making extra payments.
How? Interest rates alone can have a big effect on your minimum payment and repayment time. Depending on your situation, you may benefit from paying more on some loans, consolidating, or applying for loan forgiveness.
There’s no way to know your options unless you get to know your loans. This is why our Genius Advisor tool compares 70+ repayment options.
5. YOUR EMPLOYER MIGHT BE ABLE TO HELP
One of the best reasons not to “just pay” your student loans is that your employer may pay them for you, or match your payment dollar-for-dollar as a part of your benefits. If your employer is a Student Loan Genius Match subscriber, you can save thousands of dollars and years in repayment by simply signing up.
If your employer doesn’t have a student loan program, you can let them know you think they should offer the benefit by requesting the benefit.
HOW TO SAVE
You can’t afford to “just pay” your student loans. Follow these five pieces of advice to save you money and time. Also, let us know below how you’ve personally found ways to save on your student loan payment.