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5 Ways To Save On Student Loans

As college attendance continues to rise, intense competition for grants and scholarships can lead to more students applying for student loans. Out of nearly 20.2 million college students enrolled as of Fall 2015, approximately 69% will leave school with student loan debt according to U.S. News and World Report. As these young adults leave behind university life, it’s not surprising that students are frequently left baffled by their first loan payment.

Whether you’re a recent grad or fifteen years out of school, you can still find ways to save money on your student loan bill. Take a look at these five tips to keep your student loan debt under control.

1. Research Loan Benefits

While you were worried about getting college funding before classes started, you might not have paid attention to the benefits that start once you enter repayment. Even if you did not choose a loan for its benefits, you may be surprised at what your loan servicer can offer. Federal loans offer more opportunities for loan forgiveness in various industries and public service, along with flexible repayment plans for any income level. Private loans may offer fewer opportunities for forgiveness, but often provide credit-based interest rates, deductions for setting up automatic payments, and other unique benefits for graduation or career success. Call your loan servicer and ask which benefits are available to you.

2. Switch to Biweekly Payments Instead of Monthly

A substantial part of your loan balance is comprised of accrued interest. For federal loans, interest does not accrue while you are in school; however, private loans accrue interest after your first disbursement and the interest capitalizes once you enter your loan’s repayment period. Interest is assessed each day, so the longer you go between payments, the more interest your loan accumulates. According to Investopedia, by dividing your payment biweekly instead of monthly, you ultimately pay off more by diminishing your overall interest.

3. Avoid Fees

Read your loan disclosure to see which fees apply to your student loan. Origination fees, application fees, and egregious late fees typically come standard with federal loans; however, private student loans frequently waive fees in lieu of higher interest rates. While some fees are unavoidable years after you originate your loan, you may be able to eliminate late fees by utilizing prepayments. Loans without prepayment fees allow you to make payments while you are still in school or let you break down your payment in more manageable bits with one-time payments throughout the month. As you evaluate your loan options, be sure to examine what extra fees accompany your loan disbursements.

4. Take Advantage of Tax Deductions

Whether you are right out of college or going back to school, you may be entitled to a wide variety of higher education tax credits. A student or his parents can claim either a Hope Credit or a Lifelong Learning Credit for each dependent. According to IRS Publication 970, your loan servicer may provide you with a Form 1098-E to claim your student loan interest if you pay more than $600 in a calendar year. Use the IRS’s interactive tool to determine whether you qualify for a tax deduction.

Find out if you can benefit from student loan debt help.

5. Consolidate Your Loans

Making multiple loan payments can be confusing and overwhelming, especially when each loan has a different loan servicer. Many students accrue at least one loan per school year, and having multiple payment due dates and servicers makes paying down your loan balances much more difficult. By combining your smaller loans into one new consolidated or refinanced loan, you not only get one payment date and one loan servicer, but you can also obtain a lower interest rate. While you can combine private and federal loans, you may have to sacrifice loan benefits when you consolidate your loans. It is crucial to know that consolidation is not a hardship option; please review your loan servicers’ deferment and forbearance options if you cannot make your monthly payments.

Though the price of a college education continues to increase, your monthly payment doesn’t have to. By actively planning how to pay down your student loans, you can avoid additional interest and cut down your repayment term without taking more money out of your paycheck.

Clair Belmonte is a freelance writer and editor in the Student Loans Division of a major financial institution. Check out her writing at and reach out to her on twitter @ClairBelmonte.

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