Student loans are often necessary for higher education but managing debt after graduation can be difficult. With the right strategies, however, you can reduce the amount you owe or ease the repayment process. Here are 10 practical ways to minimise your student loan debt.
Choose Affordable Institutions
Selecting the right educational institution is crucial. Some private universities charge significantly more than government-funded colleges. By choosing an affordable institution, you could reduce your total loan amount. The less you borrow, the less you will need to repay, which could make a big difference over time.
Many universities offer financial aid and scholarships. Choosing a school with affordable fees and payment plans could help reduce your debt burden and ease the repayment process.
Apply for Scholarships and Grants
Scholarships and grants are excellent ways to reduce or avoid debt. These forms of financial aid don’t require repayment, unlike loans. Colleges, organisations, and corporations often offer scholarships for deserving students. Some scholarships are based on merit, while others focus on need, academic performance, or specific fields of study.
Grants are typically offered based on financial need. Research scholarships and grants in your area or field and apply for as many as possible. Every rupee you receive in aid could reduce the amount you need to borrow, directly lowering your loan burden.
Look for Loan Repayment Benefits
Some lenders offer benefits to help with repayment. For example, if you have made on-time repayments to other loans, lenders would consider you a reliable borrower. Lenders may also offer benefits for setting up automatic payments.
Using a financial marketplace like Bajaj Markets could help you find loan options. Always ask your lender if any interest reductions or other benefits are available, as these could lower your total repayment amount.
Choose the Right Repayment Plan
Lenders typically offer several repayment options. A standard repayment plan may involve higher monthly payments but a shorter repayment period. On the other hand, income-driven repayment plans base your monthly payments on your income. While this could extend your loan's tenure, it provides flexibility if your income is low or irregular.
Choosing the right repayment plan could prevent financial strain and allow you to manage your debt more effectively. Take time to discuss the options with your lender and choose a plan that fits your financial situation.
Make Payments While Studying
Starting repayments while still in college could reduce the amount of interest that accrues on your loan. Some lenders allow you to make interest-only payments during your studies. This can prevent interest from building up and adding to the total loan amount.
Making small payments while studying may seem challenging, but even minimal contributions could significantly reduce your total repayment amount after graduation. This proactive step could save you a lot of money in the long term.
Work Part-time to Reduce Borrowing
A part-time job during your studies could help cover living expenses or tuition. Even a few hours of work per week could reduce how much you need to borrow. Use your earnings to cover non-essential expenses, leaving your loan to cover core costs like tuition.
Earning additional income through part-time work could also allow you to make small payments on your loan while studying. Every such payment helps reduce the total amount you’ll owe after graduation.
Limit Borrowing to Essentials
Only borrow what you need to cover essential expenses, such as tuition, books, and accommodation. Avoid borrowing for non-essential items or activities, as this increases your total debt. Calculate your expenses carefully and create a budget to ensure you are borrowing only for necessities.
Keeping your borrowing as low as possible could prevent you from accumulating unnecessary debt. Reducing your loan amount from the start could make repayment much easier after graduation.
Refinance Your Loan
Refinancing could be a smart way to reduce your monthly payments and overall interest. If your credit score improves or interest rates drop after you graduate, refinancing your loan could offer better terms. Refinancing may allow you to consolidate multiple loans into one, with a lower interest rate and a more manageable repayment schedule.
Use a loan app or a financial marketplace like Bajaj Markets to explore refinancing options. Refinancing could result in lower monthly payments or a reduced interest rate, saving you a substantial amount over the loan’s tenure.
Make Lump-sum Payments
Whenever possible, make extra payments on your loan. Any financial windfalls, such as tax refunds or bonuses, could be used to pay down your loan principal. Reducing the principal could lower the total interest you owe and shorten the loan’s tenure.
Most lenders allow prepayments without any penalties, so take advantage of this opportunity to reduce your debt. Lump-sum payments could significantly reduce both your total debt and the interest you will pay over time.
Check for Loan Forgiveness
In India, some government schemes may forgive a portion of your loan after a set period of employment in specific sectors. Check if your chosen career path qualifies for such programs.
Also Read: Are Personal Loans a Good Choice for Students
Conclusion
Managing student loan debt doesn’t have to be overwhelming. By choosing an affordable institution, applying for scholarships, and limiting your borrowing, you could reduce the amount you owe. Additional strategies like making payments during school, refinancing your loan, and taking advantage of loan forgiveness programs could further ease the burden.
Using a financial marketplace like Bajaj Markets or a reliable loan app could also help you find better loan options. With careful planning and proactive measures, you could minimise your student loan debt and make repayment more manageable.
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