Paying off student loans in an appropriate manner is really about knowing your options in regard to the amount of repayment benefits that may be available with a particular student loan, along with being able to act accordingly when confronted with various scenarios.
This really isn’t very complicated, as you may be able to utilize the following repayment benefits when it comes time to pay off a particular student loan:
- Payment Adjustment Options
Student loan consolidation isn’t really a proper repayment benefit but I included it because it is something that students can utilize when it comes time pay back their student loan debt.
Deferment, forbearance, and various payment adjustment options should be available with most federal student loans, although their availability with regard to most private student loans will depend on the particular loan at hand.
A Fundamental Rule to Live By
Paying off student loans shouldn’t be too complicated, and you must keep in mind one fundamental rule when going through this process—if you think that you may have difficulty making your normal payment, always utilize your repayment benefits before allowing your loan to become delinquent, or fall into default.
This may seem like common sense, but you would be surprised at just how many students don’t even know what deferment of forbearance is, nevermind how to utilize these options appropriately. Remember that deferments push back the repayment term without capitalizing interest, while forbearances perform the same function but do capitalize interest. Payment adjustment options can alter your normal payment amount and perhaps your repayment term, and should be considered along with deferments and forbearances on a case-by-case basis.
Because deferments have virtually no downside besides that fact that you will be delaying your repayment term by x amount of months, they should be utilized first before a forbearance. Forbearances will capitalize the interest on your student loan and will therefore add to the total amount of principal you’ll have to pay back.
They should therefore be considered only after your deferment time has been exhausted, and perhaps after you have utilized any payment adjustment options that may have been available. In the end paying off student loans is about utilizing these repayment options with regard to your ability to make your normal payment, and the bottom line is that you don’t want your loan to every fall into default.