Student loans have been in demand for the last few years. Herewith, the overall student loan has now reached the point of more than $1 trillion. From the one side, students have no other choice but taking a huge loan before they can actually start a perspective and a well-paid career. This would help them earn more than they invested in their education.
From the other hand, it creates a lot of questions around the procedure of receiving a student loan since there is no particular guarantee that students would be loyal to their college debt payments in the future.
Receiving and Paying the Loan Off
Let’s look at this process closer. When being a college freshman and applying for a loan, no lender would ever expect you to have any substantial credit history, records of your income, etc.
In fact, more expectations are awaited as soon as you graduate and start going to work. As soon as they make it to their first jobs and start building their FICA scores, the game is on. At this point, loans get really tricky. For instance, if a student has a minimum wage, he realizes that he can’t afford to make regular payments to cover his student debt in time.
At the meantime, the other student with a much higher monthly income can be charged a higher interest rate.
According to the last passed out law from the US government, eliminating both federal and private student loan debt will be impossible in case of bankruptcy. Nevertheless, in both situations, you can end up in a good profit for yourself.
How to Lower Your Interest Rate If I Have a Very Good Salary?
If you consider your interest rate on a student debt unreasonably high, you can find the solution in refinancing at a lower rate. Don’t think as if refinancing would be impossible for a recent college graduate with a few records in his credit history if not less.
Lenders always take that fact into account and seek for other ways to identify your creditworthiness. For instance, some of them can review your cash flows and the level of savings, others may look at the prospects and demand for your pursued degree. What you have to know for sure is that refinancing student loans is a common phenomenon right now.
Large banks, credit unions, and other lending institutions made it possible for young people to lower their college debt interest rate.
If you plan on doing the same with your college loan, keep in mind the following:
- There might be an up-front fee if you plan to repay a student loan for a short period.
- Be cautious if you sign the agreement that says “variable rate”. It might be an option if you decide to pay down the debt in several years. Although, if your plan is stretched out for 20 years or more, such variable rate is a risky idea.
- You can refinance private student loans and end up with more benefits than you were at before. But when it comes to refinancing federal student loans, you risk losing such valuable protections (for example, income-based repayment) that private loans do not include.
How to Lower Your Interest Rate If I Have a Low Salary?
Most likely, your career will start with a low-paid position. This means, if the amount of a monthly student loan payment exceeds 10-15% of your paycheck, you have all the chances to refinance your student loan at better terms.
A good thing to remember is that such refinancing programs for low-income employees are available only for federal loans. The level of “forgiveness” varies from one particular program to another.
If you want to learn more about each of the options, visit a Federal Student Aid website. Here you can even use a repayment calculator to estimate both your payment and savings.
Here are 2 significant things to remember:
- In federal programs, a number of your payments depends on the income from your tax return. In case if you are married, keep in mind that both of your income and the one of your spouse will be considered as you apply.
- If you initially applied for a federal student loan and then switched to a private lender, you will then lose the option of refinancing your debt with these programs.
An interesting fact:
Only 40$ of the college graduates do know about the option of refinancing.
Hopefully, after reading this article, you will become one of college grads, which take actions in order to minimize their student loan debt.