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How to Manage a Student Loan


Saving Money

As you now know, it's important to keep up with your loan payments. One way to do this is to consolidate all your loans into one. This is helpful if you've taken out multiple loans with multiple lenders. As the name implies, you'll be collecting all of your student loans together into one payment. You'll be able to do this service through the U.S. Department of Education, your bank, credit union or directly through your lender.

Most federal student loans can be consolidated. However, consolidation doesn't always mean you'll be saving money. It means all your loans will be collected together in one payment, making it easier for you to keep track of what you owe and less likely for you to become delinquent.

Consolidating your loans will also give you options when it comes to payment plans. This can reduce your monthly payments and extend the terms of the loan.

Before consolidating your loan, you'll want to look at the interest rates of the loans you've taken out. Consolidating isn't always the best option as it uses the average interest rate of all the loans. The original lender may also offer loan discounts a consolidating lender does not.

Online services offer an excellent means to manage your student loans. These services are usually offered by lenders and provide for simple management of your account as well as services like deferment and forbearance. Services like Sallie Mae will allow you to utilize combined billing for student loans without consolidating them. As with any bill, it's important to stay up to date on payments and payment options. Some lenders also offer discounts for setting up an automatic billing cycle.

Managing your student loans doesn't end with setting up a monthly billing cycle, settling on a repayment method and making payments, though. It's possible that your student loans could actually save you money; tax credits and deductions may be available to you on your yearly income tax. While you're enrolled in school, you'll be able to claim up to $2,500 in tax credits for tuition and related expenses for the first four years of college if your adjusted gross income is below $80,000 a year [source: ABC News]. Once you've finished with school, you'll be able to claim a deduction on your yearly taxes for interest paid on your student loans. It might not seem like much at first, but if you use your refund to pay off your student loans, you'll be able to take advantage of the "no prepayment penalties" aspect of your loan, and even more important, you'll get out of debt quicker.

Borrower benefits are also an enticing method loan providers will use to ensure on-time payment. These benefits can include a reduction in interest rate or rebates if you make payments on time. Although these aren't as popular as they used to be, certain lenders still offer discount services for those who make payments on time and it may be worth discussing these options with your lender.

For more information on student loan management and other personal finance topics, visit the links on the following page.