Developing a Repayment Plan
The first consideration when repaying student loans is the interest rate. For most loans, paying off the higher interest rate loans first is preferable. While you may feel good about paying off a smaller loan, consider how much additional interest you will pay on your balances.
Talk to Your Servicing Company
This is particularly important if you have multiple student loans with a single lender. Make sure when you send in a payment it is being credited to the appropriate loan. In some cases, the student loan servicing company will spread any additional payments over multiple loans rather than pay a lump sum towards one loan. Track these payments carefully.
Those with student loans with high interest rates may wish to discuss their student loans with their Member Financial Representative at Oklahoma Central Credit Union. You can speak with a representative by calling us at 918-664-6000. We may be able to help you consolidate your debt and lower your interest rate.
Decide on a Payment Schedule
Depending on the balance of your student loans and the interest rate you are paying, you may decide that paying a small amount each month is the most beneficial. However, some students prefer to make a lump sum payment once a year; this may be more beneficial if you can deposit the funds monthly into a savings account. This allows you to earn interest while you accumulate funds to pay down your loans.
Stay on a Sensible Budget
One common mistake many people make while paying down student loans is using all of their savings. Make sure you don’t forfeit an emergency fund or your retirement funds to pay down your loans. Use your budget wisely and make sure you have a minimum of three months’ expenses saved in case of job loss, illness or other unexpected events.
You may be able to pay off your student loans much sooner than you think and save money on future interest payments if you develop a plan today to begin prepayment of your student loan debt. Deciding on a plan that works for your unique needs may be done after reviewing your balances, your current budget and making sure you have sufficient funds available should you have an emergency.