As graduation approaches, or if you’re already facing loan repayment, there are tactics that can help you handle your student loan obligation. This blog will guide you through essential steps to make your student loan repayment as smooth and stress-free as possible. The journey to becoming debt-free can be a little long, and starting on the right foot can make all the difference. Let’s look into the strategies that will help you manage your student loans wisely.

Assess Your Loan Details

Knowing the full amount you owe in student loans is the first step in preparing for repayment. Once you have this details, you can do your assessment. Start by gathering all your loan documents or logging into your loan servicer’s website to get a clear picture of your total debt. This includes both federal, province, and private loans. Have all the details, what interest rate is being charged, what is the minimum monthly payment required, just have all the necessary information.

Each loan may have a different interest rate, especially if you have both federal and private loans. Understand how these rates are calculated, whether they are fixed or variable, and how they accrue on your principal amount. This is important because it helps you know how the debt grows and how you can beat that. Higher interest rates mean higher monthly payments and a higher total amount paid over time. When you know your rates, it will help you prioritize which loans to pay off faster especially if you have other forms of loan asides student loan.

Another thing under assessment is understanding your repayment terms. This has to do with how long you have to pay off your loans and what your monthly payments will look like. The standard repayment term for federal student loans is 114 months (9.5 years) if you start your payments 6 months after completing your studies, or 120 months (10 years) if you start immediately after studies. However, you can request to extend your repayment period up to 174 months (14.5 years) including the non-repayment period, or even up to 180 months (15 years) if you forgo the non-repayment period​. You will want to find out about the repayment term of your loan servicer if it’s a private loan. Understand the minimum payment requirements and how long you are expected to pay. 

Budgeting for Repayment

Now that you understand your student loan repayment details, the next line of action is adjusting your monthly budget to accommodate loan repayments. Loan repayment is just one part of your finances, there are still other things that needs attention. This is why you need budgeting. This might mean reevaluating your spending habits to free up more money for your loans. Especially if you don’t earn much. Your focus will be to take care of your basic needs, cut out waste or overspending, to free up extra cash for student loan repayment. This approach helps you make your payments easy and also accelerates it.

In freeing up extra cash, you may want to consider setting up a separate account or a dedicated budget category just for your loans. This will ensure that your repayment fund is organized and you won’t be able to accidentally spend this money on other things. You may consider automating your loan payments too, to prevent late fees that may cost you extra payment.

If your budget gives you the opportunity, you can make extra payments on your student loans. The advantage is you will be able to reduce the total interest you pay and shorten your repayment period. However, before making additional payments, ensure there are no prepayment penalties associated with your loans. 

Repayment Assistance Plan

If you are struggling with paying back your student loans, you can get help through the Repayment Assistance Plan (RAP). It is a way the government lend a helping hand to graduates that are finding it hard meeting with their student loans obligation. This plan makes it easier to manage your loan payments based on how much money you make. If you qualify, your monthly payments could be lower, or you might not have to make any payments until your income increases. The government could also cover the interest on your loan that your payments don’t cover. To apply, you need to show how much you earn and update this information every six months. You can apply for RAP as soon as you start repaying your loan and anytime during the repayment period if you feel you need it.

Preparing for the Unexpected

Facing life after school is a whole different ballgame, now you have to work hard and fend for yourself. The dream of an average Canadian is to be debt-free, own a home, a good car, a good job, a lovely family, and Greta wealth. But so many things can stand in the way of these things. Life is not that predictable. There could be situations where you are laid off from work, or a family emergency, or anything at all that can throw all your plans in disarray. Before this happens, you need to be prepared, you need to know that emergency situations are part of life. This is the more reason why you should build an emergency fund, so that when situations like this happen, you won’t be stranded.

Conclusion 

Managing your student loan debts can be easy if you have a stable income and managing the debt with other debts you may have. However, if you have overwhelming unsecured debts, it can become hard to meet up with your student loans obligations. But there’s help available for you. When you seek help, your debt can be reduced by up to 80%, and interest will stop immediately. You can speak with one of our debt experts at EmpireOne Credit at (416) 900-2324. Consultation is free.

Being debt-free feels good!