Student loan repayment is often a long-term endeavor, but understanding the opportune times to adjust your repayment strategy could save you a lot of time and money over the course of your loans. There are a number of financial events that should prompt a review of how you are managing student debt. Let’s take a look at the best times to actively manage your student loans.
When your grace period ends
Upon graduation or leaving school, most student loan borrowers are granted a grace period where repayment is not yet a requirement. During the months leading up to the end of your grace period, actively managing your student loans is a must. You may want to start better understanding the fine print of your loans and ask questions such as: Do you have private or federal student loans? What are your current balances? Do you know the interest rate assessed on each loan? Who is your servicer?
Knowing the answers to specific questions on loan types, balances and interest rates shortly before your grace period ends allows you to take advantage of the repayment strategies unique to you. This is also a good time to explore the refinancing process and see if you can lower your monthly payment.
When you get a promotion
Receiving a hard-earned raise or promotion with your employer is not only worth celebrating, but also a time to review your student loans. If you are on a standard repayment plan, this is a good time to explore prepaying on your student to reduce your debt faster. Now, if you would rather have a structured repayment plan, your additional income makes you a lower risk to lenders, which may lead to different, more cost effective options such as refinancing where you can change your repayment terms and potentially lower your interest rate.
When marketed rates are low
Although federal student loans have a fixed interest rate that will not change throughout the lifetime of your loan, private lenders can offer attractive rates based on the current interest rate market. With interest rates for borrowers at an all-time low, it may be the perfect time to consider refinancing. A reduction in your student loan interest can have a long-term, positive impact on your monthly repayment amount, and can reduce the total amount repaid over time. If you are unsure what rates are currently available, check out Credible to see what interest rate you may qualify for.
When new lenders enter the market
If you have considered consolidating or refinancing your student loans, new entrants have emerged and have added competition in the market. There are 11 lenders who refinance federal and private student lenders in the market today compared to just two, three years ago. The addition of new lenders in the student loan market provides greater diversification, as well as a benefit to niche borrowers. This means that managing your student loans is becoming a dynamic process and by staying informed of the options available to you, you could save a lot of money over the life of your loan. Refinancing is not a one-time process, you can refinance multiple times over the life of your student loans.
When your credit improves
Whether you have been working diligently to boost your credit score or it has simply happened with time, a noticeable positive change in your credit should prompt a review of your student loan repayment options. As your credit score improves with longer account histories and a track record of on-time payments, your risk profile becomes more attractive to lenders. If you now fall into the category of a highly qualified borrower, lenders who specialize in consolidation or refinance of private or federal student loans are more willing to offer better interest rates and repayment terms for your student debt.
When you find a willing cosigner
Some borrowers with less-than-ideal credit histories may not be eligible for refinancing or consolidation of student loans without the help of a strong cosigner. If you have recently found someone willing to cosign on a refinance of your student loans, reviewing your options. The benefits of reducing your interest rate and changing your repayment terms can save you thousands over the lifetime of your student loans. Just be sure your cosigner has a full understanding of how much debt you have outstanding, and the responsibilities under the new loan agreement.
If you are interested in learning more about the refinancing or consolidation process, visit Credible.