Don't Wait – These 3 Steps Could Save you a Ton on Your Student Loans

Confused over new rules for student loans and repayments? Informed decisions made now could save thousands of dollars and lots of headaches trying to manage life's other financial challenges. Finance and policy expert Elaine Rubin worked for seven years at the U.S. Dept. of Education's Federal Student Aid office, making her extremely knowledgeable on this complex subject. Here is the cheat sheet of her three top tips to save money on your student loans.

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Pull out the paperwork.

Find out what you've borrowed and how much you still owe. Copy or snap key figures for later reference if you don't want to slog through contracts and fine print. Include sections that show interest rates and how much they've been adding to your loan liability. Look at your repayment plans. Are you enrolled in the government's Saving on a Valuable Education Plan, also known as SAVE? If so, pay attention to garnishment rules arising from legal challenges during the Biden administration. 

Rubin says total indebtedness is a "question that most borrowers can't answer." She adds that folks behind in their payments often don't know it, adding to interest costs. "Many borrowers I’ve worked with are surprised to find they owe more than they initially borrowed when it’s time to start repayment, Rubin explained. "Because most loans, except subsidized ones, begin accruing interest from the moment they are disbursed."

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Plan repayments and don't count on student loan forgiveness.

SAVE enrollees have been in limbo since last summer, caught in a court-ordered administrative forbearance. That stopped interest rates, but the payment hold is scheduled to end no earlier than September, after government systems are updated. Check out the Department of Education’s Loan Simulator for possible repayment options when the interest clock runs again. That site also has eligibility information for specific plans.

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According to Rubin, borrowers can also restate income if they earn less now than at the time of the first loan forbearance in 2020. Lower income may reduce your student loan payment if you are enrolled in an income-driven repayment plan. Borrowers on that program may also qualify for student loan forgiveness. But they shouldn't count on relief because, as Rubin notes, "legal challenges continue to threaten SAVE and some of the other IDR repayment plans."  

As a side note, teachers, nurses and other public service employees under the Department of Education's Public Service Loan Forgiveness program can cancel debt if they meet strict job length and repayment rules.

Pay off as much interest as possible when you're still in school. 

Not everyone has the resources to pay for college, and a college loan, at the same time. But student loans generally don't start the repayment clock until six months after graduation, or after failing to meet enrollment guidelines. So, Rubin says it helps if the borrower can "pay off any interest that accrues while you’re still in school. Even small contributions can help reduce the overall cost of your loans in the long run."

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