Don’t Lose Hope, You Can Repay Student Loans

By Sean Longford

Do you have any idea on how to repay student loans? In this day and age, it is essential that you have a good college education if you want to get a high-paying job and for most that means you have student loans. These loans can often get out of control when you get behind on payments, but fortunately there are a few things you can do to dig yourself out of that hole.

First, you can refinance. By refinancing you transfer your loan to another lender that will give you a lower APR (annual percentage rate), and therefore a lower monthly payment. Your APR is the total cost of the credit given to you by the lender. It is a percentage of your total loan and the amount of money it represents decreases as your loan amount decreases. First you should consider the cost of refinancing. While there are some lenders that won’t charge you a fee up front, some will. Avoid lenders that want to charge you a fee that will end up costing you more on a monthly basis, as that defeats the purpose.

The bank where you do your personal banking is a great place to look when you want to refinance your student loans because you both know each other financially. Your bank has records of all the business you’ve done with them and a good idea of what you are like. Another factor that works in your favor is the fact that banks enjoy having customers attached to several of their “products,” as it gives them stronger bonds with these people; people that are less likely to default on loans with a bank with which they have had a long-term relationship.

Second, consider consolidation. Consolidation simply means that all of your student loans are “bought out” by a lender (maybe even the lender that holds one or more of your current loans) and pulled together into one large loan. You can then pay on all your loans in one big monthly payment, rather than several smaller payments. Because you are making lower monthly payments, you save money in the short term.

You do have to consider the fact that consolidation will cost more money in the long term. While you definitely save money right away because your payment is smaller, the accumulated interest will in the end cost you more on the back end of the loan. In other words, you are only going to be paying a little bit at a time on the principal, i.e. the full amount of your loan, not counting interest or other fees. Most of your monthly payment will go towards the interest, making it take longer for you to pay it off.

Conclusion

If you are out of college yet still struggling with your student loans, don’t file for bankruptcy just yet; consider your options first. Both refinancing and consolidation are great options that will ease your burden, allow you to repay student loans, and get on with your life.

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