Pay off student loans

1. Are you using the right payoff strategy?

¿Está pagando varias deudas? Necesita implementar una buena estrategia. Here are two popular payoff strategies that can help you reduce your overall debt, including student loans:

Snowball: Paying off the smallest balances first—aka, the snowball approach—can free up cash flow the quickest. Even if your smallest loan takes a few years to pay off, using more of your budget to make larger payments on your smaller loans can be one of the quickest ways to start reducing your debt and paying off your student loans. Getting that first balance paid off can help give you a mental boost—and help you start making even bigger payments on your other balances. The bigger the payment, the faster you can lower your principal balance.

Avalanche: Focus on whichever debt is costing you the most—typically the one with the highest interest rate. It may take longer to feel like you’re making progress, but tackling the costliest debts first may save you the most money in the long run. 

2. Can you refinance your student loans for a better interest rate?

Typically, when you take out student loans, you have little to no credit history-which impacts the interest rate on your loans. Cuanto más alta es la tasa, más costoso es el préstamo. But now, you may have a better credit history and higher credit score, which could help you qualify for a lower rate. Lowering your rate by even one percentage point could help you move up your payoff date and may save you thousands in interest payments over the life of your student loan.

3. Should you consolidate your student loans?

If you have multiple student loan balances, you may want to consider consolidating. You can potentially refinance for a better interest rate and reduce the number of monthly payments you have to keep up with. For some, consolidating can lower the cost of your debt, move up the payoff date, and free up cash flow all at once.

Pro tip: Think twice before consolidating any federal student loans with private loans. When you do this, you’ll give up access to any federal benefits, including repayment plans designed to help low-income borrowers and potential loan forgiveness programs. Además, y en primer lugar, los préstamos federales suelen tener tasas de interés inferiores a las de los préstamos privados. 

4. Is student loan forgiveness an option?

Si está pagando un préstamo estudiantil privado probablemente la condonación no será una opción. For federal student loans, you might've heard about recent plans to cancel student loan debt for some borrowers. There are additional programs that offer federal student loan forgiveness if you meet certain conditions. However, the number of people these forgiveness programs can help is relatively small, and you shouldn't count on them as part of your student loan debt payment plan.

One of the most common programs is the Public Service Loan Forgiveness program, which offers loan forgiveness to some borrowers who work for a government agency or nonprofit and make qualifying monthly payments for at least 10 years.^{Divulgación 1} También, si usted trabaja en un área en el que la paga es baja, podría acceder a la condonación de ciertos préstamos estudiantiles federales después de haber pagado durante más de 20 años en el marco de un plan de pagos basado en los ingresos (IBR).^{Divulgación 2}

5. Can you pay a little extra?

Si está pagando un préstamo estudiantil privado probablemente la condonación no será una opción. For federal student loans, you might've heard about recent plans to cancel student loan debt for some borrowers. There are additional programs that offer federal student loan forgiveness if you meet certain conditions. However, the number of people these forgiveness programs can help is relatively small, and you shouldn't count on them as part of your student loan debt payment plan.

One of the most common programs is the Public Service Loan Forgiveness program, which offers loan forgiveness to some borrowers who work for a government agency or nonprofit and make qualifying monthly payments for at least 10 years.¹ Or, if you’re in a lower-paying field, you could have certain federal student loans forgiven after making payments for 20+ years under an income-based repayment (IBR) plan.²

6. How do student loans affect your credit score?

Los préstamos estudiantiles pueden sentirse como un mal necesario, pero un consuelo por tomar una deuda para la educación es que le da la oportunidad de iniciar su historial de crédito como adulto joven. Each on-time payment you make may help add up to a mejorar su puntuación de crédito. And when it comes time to borrow for a car or home, you may be able to score a better deal.