Private student loan debt is a problem for many college grads today. Student loan debt can be difficult to manage regardless if its federal student loan debt or private student loan debt, however private student loan debt often proves the most challenging because of the lack of repayment options and/or programs. Here are “5 Tips to Help with Private Student Loan Debt” that can be utilized to help you become private student loan debt free:
1. Make all of your private student loan payments on time.
Failing to treat your private student loan payments with the same amount of attention as you would treat your credit card debt, could hurt your credit rating in the future. If you are having trouble making your student loan payments, you need to open the lines of communication with your lender. Some private student loan lenders may be willing to work with you.
2. Consolidate your private student loans, if you can.
Private student loan consolidation is very, very limited these days, in fact most lenders are not doing private consolidation loans at all anymore. With that being said, if you can find a lender willing to consolidate your private student loans it may be a good deal for you based on the following:
a.) the consolidation will reset the term of the loan and this may reduce the monthly payment, which can be beneficial if you are having problems making your monthly payments (keep in mind however, this will increase the total interest paid over the lifetime of the loan).
b.) because the interest rates on private student loans are based on your credit score, you may be able to get a lower interest rate via a private consolidation loan if your credit score has substantially improved since when you first obtained the loan.
3. Know your tax options.
If you meet income requirements, you can deduct up to $2,500 per year in interest on ANY loans used for higher education. Most private student loan lenders should present you with the applicable tax documents by January 31st of any given year. If you have paid interest on your private student loans (which you have, if you made any payments) and have not received any tax documents from your lender, contact them.
4. Prepay as much as you can.
One of the best things you can do for private student loans, or any student loans for that matter is to make prepayments. Both types of student loans (federal and private student loans) will let you make penalty-free prepayments.
5. Budget, budget, budget.
It may sound redundant, but budgeting plays a key role in paying off high interest debt, such as private student loans. Cutting frivolous spending, and making tackling private student loan debt a serious priority can go a long way in student loan debt reduction. Consider making as many prepayments as you can to reduce the balance of your private student loans. Making the minimum monthly payments is great, but making MORE that just the minimum is even better.