8 Biggest Student Loan Repayment Mistakes to Avoid

It is easy for students to make mistakes when determining available repayment options without conducting extensive research. Researching to know more about the repayment programs of different student loans will help you choose the most suitable one. We’ll consider some of the biggest student loan repayment mistakes to avoid.

1. Not considering the repayment penalty

There are some private loans with repayment penalties when loans are repaid before the due time which might cause the firm to lose. If you are contemplating paying off your loan balance early, remember that a number of loans come with prepayment penalties. Also, note that different types of loans use different names for these same fees. Repayment penalties can also be called redemption charges, early redemption fees, prepayment penalties, or financial penalties.

2. Choosing the wrong repayment plan

Consider the repayment plan you can afford on a monthly basis that will help you offset your loan charges at the right time. International students have a tendency to choose the payment plan with the lowest monthly payment instead of the highest payment they can afford. The challenge here is that the payment plan with the lowest monthly payment also has the longest repayment term. This increases the total interest and ultimate amount you will pay, it is one of the biggest student loan repayment mistakes to avoid.

3. Forgetting to update your contact information

You need to avail your lender the details of your contact information including mailing address, email address and telephone number. Since repaying the student loan is your responsibility, you should know that a student loan servicer can change. It is, therefore, important to have your contact information up-to-date.

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4. Not making an extra student loan payment

Making an extra payment is a good strategy to pay off your loans faster. You can do this by sticking to your budget and avoid spending on unnecessary items. To make extra payments, you can consider an extra payment once every three months. This is in addition to the 12 monthly payments thus making it 16 payments per year in total. You can discuss this plan with your lender in order to limit your interest charges.

5. Overusing forbearance

Most student loans have payment forbearance options that allow borrowers to suspend their payments temporarily in difficult times. However, the interest will keep accruing. Thus, forbearance should only be used when absolutely necessary like during job loss. This is because it will grow the student’s loan balance over time.

6. Not applying for student loan forgiveness

There are several loan forgiveness programs in various fields that could benefit students who qualify for them. After doing your research, you can apply to the organization you work with or others to enjoy a debt-free study experience.

7. Falling for student loan scams

It is sad that while student loans are intended to help students through school, some entities seek to thwart this aim. Companies involved in student loan scams claim to offer “debt relief services” but do not do so at all. Unfortunately, students who are unaware could easily fall victim of such scams. All hands must, therefore, be on deck to checkmate this menace.

8. Refinancing student loans without checking if it saves money

Refinancing your student loan with a longer repayment term might reduce the monthly payment, but cost more money in the long run. It might also increase the average interest rate. Students with multiple student loans can save money by choosing the highest-rate loans for quicker repayment instead of refinancing the loans.

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