How to Reduce Private Student Loan Debt
Private student loans often come with high interest rates and long repayment terms, both of which lead to paying lots of interest as you repay your debt. The two main ways to reduce the amount you owe and the amount of interest you pay over the life of the loan are to get a lower interest rate and shorten your repayment term as much as you can afford to. The sooner you start thinking about repayment, the more you can do to reduce your cost.
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Instructions
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Make payments on your student loan while you are in school, if possible. Interest starts accruing the day you borrow the money, and if you pay that while you are in school, you will owe less when you enter the regular repayment term.
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Call your lender and ask about programs to reduce your interest rate. Many lenders lower your rate by a fraction of a percent if you enroll in automatic debit for your monthly payments. The interest rate reduction will make more of each payment go toward reducing the balance on your debt.
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Consolidate your private student loans at a lower interest rate. If you don't have much credit history, ask someone with good credit to co-sign on the consolidation loan with you. This will help you get the lowest interest rate possible.
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Cut your basic living expenses so you can make larger payments on your private student loans. For example, having a roommate now will help you pay off your debt much faster so you will be able to afford to buy your own place sooner than you would if you repaid your debt more slowly.
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Make extra payments on your student loan with the highest interest rate first. This is the debt that is costing you the most to carry, so the sooner you pay it off, the better.
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Tips & Warnings
Federal student loans are generally better than private student loans in terms of interest rates and loan forgiveness opportunities. When you are borrowing money for college, try to get as much as possible in federal loans before turning to private student loans.
