Home > 2015 > Students

5 Ways to Optimize Your Student Loans in 2015

Advertiser Disclosure Comments 1 Comment

If you’re the type to make New Year’s resolutions, chances are one of them had something to do with money – save more, spend less, etc. And if you’re one of the 40 million Americans dealing with student loans, chances are your money resolution had something to do with paying down that debt, or getting it off your plate once and for all.

So how can you best achieve your student loan goals this year? Here are five simple but powerful ways to cut costs and be done with loans sooner, so you can look forward to a less indebted 2016.

1. Sign Up for ACH (Automatic) Payments

If you haven’t already set up automatic payments with your lender or servicer, now’s the time to get this done. Most lenders offer a 0.25% interest rate discount for auto-paying, plus it minimizes the chances of missing a payment (which can hurt your credit score).

2. Prepay When Possible

Prepaying, or making extra payments, is one of the most effective ways to accelerate loan repayment – especially if your loan servicer puts that surplus cash toward loan principal instead of earmarking it for future payments (you’ll need to confirm that they’re doing so). Since interest is charged as a percent of principal, the faster you can reduce that figure, the less you’ll spend on interest over the life of your loan.

You can also borrow a trick from the mortgage industry and make bi-weekly payments. Paying every other week instead of monthly adds up to an extra month’s worth of payments each year, and you can line up the payments with your paycheck so that you don’t have a chance to miss the money. Note that most servicers can’t accept automatic bi-weekly payments, but if you decide to go this route you can always use ACH for the first monthly payment and send a check for the second.

3. Look Into Refinancing

Besides prepaying, another great way to save money on student loans is to refinance them at a lower interest rate. The better your credit score and other financial specs, the lower your new rate could be – saving you a significant amount of interest and potentially lowering your monthly payments or shortening your loan term in the process. And many people don’t realize that refinancing is available for both private and federal student loans – you’ll just want to check first to see if you qualify for federal loan forgiveness benefits, because they don’t transfer to private lenders when they’re refinanced.

And if you’re concerned that refinancing sounds like a time-consuming, paperwork-heavy process with a negligible payoff, think again. These days the refi process can be short, sweet and online.

4. Use Forbearance Sparingly

If you absolutely need to put your loans on hold, forbearance is often the only option available. Just be aware that in most cases, interest continues to accrue during the forbearance period — which ends up costing you more in the long run. Use it when you need it, but end it as soon as possible to minimize excess costs.

5. Keep Your Credit in Good Shape

Since credit score is a big factor in determining refinance rate (and crucial to achieving other financial objectives), take care of it and it will take care of you. In order to do that, it’s helpful to understand how your student loans play a part – for example, knowing how refinancing, consolidating and or/prepaying your loans could affect your credit.

Furthermore, it’s important to always pay your student loans on time, since your payment history is the most important factor in a credit score. You can see how your student loan payments are affecting your credit by checking your credit reports and credit scores. Credit.com offers a free credit report summary, updated every month, which explains how your credit history is influencing your credit-worthiness.

More on Student Loans:

Image: iStock

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

  • nancyfarmer

    What’s missing in this discussion about student loans and debt is a
    reminder that the best solution is to avoid debt by planning and saving for
    college. I am President of a consortium of 278 private colleges and
    universities that voluntarily sponsor a prepaid tuition plan, Private College
    529 Plan. 529 savings and prepaid plans offer tax breaks for families and even
    small, regular contributions to a 529 Plan will add up over time. Bottom
    line: earn interest rather than pay it.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team