This post will guide you through how to pay off your loan during this period of the pandemic. Carefully read through. Most college students these days take out student loans to pay for the cost of higher education. In fact, 68 percent of college seniors who graduated from a public or nonprofit college in 2015 had student loans, according to a study by the Institute for College Access and Success. So, due to the fact that education costs a lot of money, seeking some type of support in terms of loans is near-inevitable. Nevertheless, joy lies in repaying the loan as at when due.
What is A Student Loan?
Just as it sounds, a student loan is a type of loan created to help students pay for post-secondary education and the associated fee. Student loan handles fees such as tuition, books and supplies, and living expenses. It may differ from other types of loans. The interest rate may be substantially lower and the repayment schedule may be deferred while the student is still in school. It also varies in many countries in the strict laws regulating renegotiating and bankruptcy.-Wikipedia- In addition, many of these loans are offered to college students at a low-interest rate. Ideally, students are not obligated to repay these loans until the end of a grace period, which begins after they have completed their education.
Types of Student Loans
Not all student loans are the same. Some are privately funded while some are sponsored by the federal government.
Private Funded Students Loan
A private loan is a financing option offered by non-government entities with the sole aim of getting a better amount in return. However, private loans, which are heavily advertised don’t have the forbearance and deferral options available for federal loans. In contrast with federally subsidized loans, interest accumulates while the student is in college, although repayment may not begin until after graduation. Private student loans, on the other hand, are acquired from a bank, credit union or online lenders and credit scores are a big factor in determining the interest rate. Also, private loans often come with higher interest rates, unlike federal government-sponsored loans. A number of financial institutions administer private student loans, including banks like Wells Fargo, and specialized companies. There are also a number of state-affiliated, nonprofit student loan lenders, which account for approximately 10% of the private student loan market. This segment includes organizations such as VSAC and MOHELA.
Federal Government Sponsored Loans
Federal student loans are made by the government. They have terms and conditions that are set by law. They also include many benefits (such as fixed interest rates and income-driven repayment plans) not typically offered with private loans. These loans normally come with low interest rate and offer services such as; subsidies, credit check, tax benefit, consolidation and refinancing, postponement options, repayment plans, prepayment penalties and loan forgiveness.
Why Should I Take Student Loan?
Loans are a necessity for most students as it aids the payment of school tuition, other fees, and helps to cover living expenses. There are many types of student loan options for students. However, students often take out a mix from different lenders to ensure they have enough funds throughout the training. Each lender and loan type has its own provisions, qualifications, and requirements, and the interest rates they charge vary greatly. Being knowledgeable and strategic about the types of loans you apply for and accept can help in your decision making. Federal loans and private loans are the primary sources of student loans.
How To Get Rid of Student Loans During The COVID Period
Aside from the federal student loans in forbearance that clears student loans, there are other smarter ways of getting rid of student loans during the COVID pandemic. Let’s take a look at these ways.
How To Get Rid Of Federal Student Loans
The options available to aid you offset your federal student loans bill are;
Continue monthly student loan payments
This is one of the most precise ways of offsetting a federal student loan. What this entails is that you have to stick to the initial monthly student loan repayment plan.
Pay no interest on federal student loans.
According to reports from Forbes, until September 30, 2020, the interest rate on your federal student loans is 0%. Good news right? what this means is that no interest will accumulate on your federal student loans during this period. Nevertheless, you should still make your regular federal student loan payment amount. The benefit here is that you can use this period to help pay off student loans quicker.
Pause your federal student loan payments.
The report has it that over 24 million Americans have applied for unemployment since the commencement of stay-at-home orders. Now, the best financial decision may be to keep loans in forbearance and take care of other important expenses. Thus, if you have any kind of high-interest debt, credit card, for example, this would also be a good opportunity to pay that down. Although this will not lessen student loan payments, at least, the borrower can resume payments in October. Lastly, you can use the next six months to create financial support that can keep you financially sound without having to apply for an emergency high-interest loan or a credit card, according to experts. During this time, an emergency fund could be beneficial for unexpected medical expenses, home expenses, and unemployment.
Make an extra student loan payment.
This is not part of the CARES Act or Trump’s student loan plan, but it is a contrarian strategy. If you have accessible funds, an extra payment of any amount will help to pay off your student loans faster. If you don’t need a six-month or less pause, then this is a great time to pay off your student loans as much as possible.
How To Get Rid Of Private Student Loans
Though the processes and protocols differ from the Federal student loan, you should have the following in mind while trying to offset your loan this COVID 19 period
The CARES Act doesn’t offer the same benefits for federal student loans and private student loans.Payment for private student loans is between you and your lender. Therefore, private lenders will not suspend interest payments or automatically pause student loan payments.Therefore, you should continue to pay your private student loans in the normal course.You can contact your student loan servicer to inquire about potential payment options due to Coronavirus. Many student loan lenders have similar forbearance and deferment options as the federal government, and they will allow you to pause your payments due to financial hardship.Interest is still going to accrue even if it’s an emergency forbearance or disaster forbearance that a private lender is offering.
Banks like Citizen Bank are offering three months forbearance, not included in a borrower’s existing forbearance maximum.
How to get out of student loans without paying
Relocating to another country or faking your own death isn’t the best way to get out of student loans. There is a more easy and genuine way of doing that which will benefit you more. Below is a list of things you can do if you want to get out of your loans or debt without paying:
Student Loan Refinancing
Student loan refinancing is one of the best options for paying off student loan debts aggressively. If you can get a lower rate, you could save thousands of dollars in interest over the life of your loan. Student loan refinancing links your existing federal student loans, private student loans, or both into a new, private student loan with a lower interest rate. If you refinance federal student loans, you will no longer have entree to federal student loan benefits, including temporary relief. However, your interest savings from student loan refinancing may save you more money in the long-term since you can reduce your interest rate permanently. So, this could be a smart time to lock-in a low rate now before interest rates could rise again. When you refinance your student loans, you can lessen your monthly payment, pay off student loans faster, and get out of debt faster. To pass for student loan refinancing, you must be employed and have recurring monthly income and a credit score of at least 650. You can also apply with a qualified co-signer. Since there are no fees to refinance and no boundaries to the number of times you can refinance, you can refinance as often as you can get a lower rate. You can also apply with a qualified co-signer such as a parent or spouse who meets this criterion to help enhance your chances for approval and a lower interest rate. This student loan refinancing calculator shows how much you can save when you refinance student loans.
Conclusion
It is highly advisable to obtain loans in order to pursue an academic career. In that same light, it is pertinent to offset such loans when due. Therefore, this post has made an effort to bring to your notice, the several ways of getting rid of student loans. Just as it sounds, a student loan is a type of loan designed to help students pay for post-secondary education and the associated fees, such as tuition, books and supplies, and living expenses. Of course, they do. Banks like Citizens Bank and Wells Fargo offer student loans. The interest rate on your federal student loans is 0%.
