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5 Things You Should Know About Repaying Student Loans

Most graduates enter the real world with a massive student loan debt on their shoulder. The amount is even higher while the interest charges add thousands to the debt payments over the total life of the loan.

Repayment is a mountain that can be climbed with proper guidance. Here are 5 important things that can help you with your debt repayment.

  1. Cut interest rate – You can cut interest rate on your existing federal student loan by 0.25 percentage points with just one easy step. All you need to sign up for making your monthly loan payment through automatic debit and the interest rate will be immediately dropped. It’s as simple as that.
  2. Extend repayment period – If you have borrowed 30,000 USD or more in federal student loan, you can opt for an extended repayment plan. It will lower your monthly payment by lengthening repayment period up to 25 years.
  3. Don’t drop out of repayment program – Dropping repayment program can cost you a lot. For instance, federal TEACH grant provides up to 4,000 USD to those who commit to teach low-income students in high need arenas for a minimum of 4 years. But if you don’t complete the service, your grant will be converted into an unsubsidized Federal Direct Loan or Stafford Loan and that means you will have to pay off every single dime of your grant along with interests starting from the very day you got the award. In case you decline subsidized Stafford loan with present interest rate of 4.66% in order to accept a TEACH grant, you will lose twice as the grant converts into a higher rate.
  4. Make smaller payments – If you don’t have good income, you can make smaller payments on your loan and even can have some portions of the debt forgiven. Income-based repayment options like Pay As You Earn are offered to the borrowers who have plenty of debt relative to income. Such plans allow putting 10% of the ‘discretionary’ income (the amount by which one’s income surpasses 150 percent of the poverty line) towards the loan over 20 years. Any remaining amount after that is forgiven.
  5. Move to small towns and get debt relief – Yes, it is true; dwellers of small towns can get big debt relief. For example, if you move to any of the rural counties of Kansas, you, as a recent college grad, can get about 3,000 USD every year for a maximum of 5 years to pay back your outstanding loans.

These are just some of many important things to convey from the desk of Bigdaddy Loans that you must know about student loans.