You’re told to reach for the stars and pursue your dreams, but when it comes to enrolling in college, it seems that the cost of a quality education is doing the same.
The average cost of college has steadily increased over the last 20 years, and today, students can expect to spend around $50,900 a year for a four-year private education or $25,290 annually for a four-year in-state school. Out-of-state students enrolling in a public university can expect to pay around $40,940 a year.
If you’re like most students, the price tag attached to a year of college is one that requires financial assistance, specifically in the form of a student loan. Today, student loan debt is one of the most common forms of debt in the United States, and though escaping it may not be a reasonable expectation, there are ways to make it more affordable.
What does affordable look like?
For some, it may be decreasing the interest rate and hopefully minimizing the total cost of their loan. Others struggling to manage their budget may simply be looking for a way to decrease their monthly payments. Regardless of what camp you fall into, here are a few options available to help you save money on student loans.
Choose the Lowest-Cost Options
When we talk about how much a loan costs, it’s often the interest rate that takes center stage, and rightfully so. The interest rate is essentially how much the lender charges you to use their money. This rate is applied to the total loan amount, or the principal, on a regular basis.
Interest accrues over the life of a loan, and therefore the longer you take out a loan, the more expensive your student loan becomes.
Federal Student Loans
One way to increase affordability is to seek out loans with the lowest interest rates possible. For many students, federal student loans will meet this condition.
Private Student Loans
Other student borrowers, particularly those who have exhausted or are not eligible for federal student loans, will need to review the various options provided by private student loan companies. Private lenders can set their own interest rates and borrowers can compare the rates of numerous lenders before selecting one.
Additionally, since private lenders typically base at least a portion of their rate decisions on the applicant’s credit score, it’s important to note that this can and often does impact your access to lower rates. In some cases, adding a cosigner with excellent credit can help you obtain a lower interest rate.
State-Based & Local Options
Still, student borrowers also may find more affordable student loans by turning to state-based loans or loans offered by organizations, some of which extend zero or extremely low interest rates. These are often highly specialized or driven by very specific requirements, like living in a certain location or pursuing a specific area of study.
In other words, before you take out your loan or make an effort to refinance or consolidate a loan, review all your options to find lenders that offer the best interest rates for your current situation.
Make Loan Payments While in School
Many lenders, including the federal government and numerous private lenders, allow students to defer payments while in school. For some students, this allows them to focus solely on their academics without worrying about what can be a substantial monthly bill.
However, students who choose to make even small payments can end up saving big in the end. Over the course of your college career, every payment can help you pay down a significant portion of your loan before it officially moves into repayment status. This is particularly true for federal student loans, some of which do not accrue interest while you’re in school.
If this sounds like an attractive option, here are a few steps you can take to get started.
View the full article here: How to Save Money on Student Loans