In this article, we will learn how to avoid paying interest on student loans. We will review some strategies you can follow to reduce the total amount of interest you will pay on your student loans.
Full Loan Repayment
The easiest and quickest way to avoid paying a lot of interest is to pay off the loan in full. This way, you avoid paying interest month after month. According to some estimates, it takes an average of 20 years for a borrower to pay off their student loans. Over time, the amount you will pay in interest accumulates. This strategy is useful if you have enough money to pay off your loans, and if the interest on your loans is higher than the interest you could earn through saving or investing.
Increase Monthly Payments
If you don’t have enough money to pay off the loan in full right now, you can reduce the amount you pay in interest by increasing the monthly payment amount. Can you afford an extra $10 or $50 or even $100 more a month? If so, you can start significantly reducing the size of your loan. If you want to be more aggressive, you can add an extra full payment each year, meaning you would make 13 payments in a year instead of 12. If you have the funds, you could even choose to pay twice a month instead of once. Regardless of the method you choose, by paying a larger amount than the minimum, you will speed up the repayment of the loan in full, which will help you save money in the long run.
Take Advantage of the Zero Interest Period
Don’t forget that until August 31, 2022, the interest on federal student loans will be zero! This is a great opportunity for you to eliminate the principal of the loan and reduce the amount you will pay in interest in the long run, even if you can’t pay off the loan completely. While President Biden has proposed the possibility of student debt cancellation, it is not guaranteed, and it is still unclear how much of the debt will be erased, if any. Therefore, any payments you make now will save you significant amounts when the pause on federal student loan payments is lifted.
Good luck!
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Sources:
- Federal Student Aid. “Interest Rates and Fees for Federal Student Loans.”
- Sallie Mae. “Pay Off Your Student Loan Faster.”
Source: https://www.thebalancemoney.com/how-to-avoid-paying-interest-on-student-loans-5496805
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