Pay Student Loan Interest While Still in School
If at all possible, try to make interest payments on student loans even while the student is still in school. That way you or your child will only owe the principal, not interest, plus the interest on that interest. In many cases the payment could be less than $50 per month, but the long-term savings can be useful. According to Sallie Mae, the average student could be able to reduce the repayment period by as much as 50% while saving almost 30% on the total cost of the loan. While it sounds counter-intuitive to pay while you are still borrowing, interest payments could generate dramatic overall savings on college loans.
With today’s high college costs, it’s becoming very difficult to avoid the need to take on student debt. Although a necessity for some families, student loans can weigh a college graduate down for decades and, in some cases, become a financial hardship for the whole family. However, if handled responsibly, they can be paid down fairly quickly and inexpensively. The key is to have your college student make interest payments while still in school. While that may sound counter-intuitive, it offers several advantages:
- According to Sallie Mae, interest only payments, as low as $50 a month, can reduce the overall interest cost of the debt by 30% and reduce the payment period by as much as 50%.
- Your college student will develop the early habit of responsible debt repayment
- It can help your child build a solid credit history while in school
The ability to make loan payments on federal and private loans while enrolled in college has been available for a while; however it is not typically publicized by the providers. They are generally promoted by emphasizing the ability to defer payments until after graduation. The decision to defer loan payments can be one of the costliest your college student will make.