How to Make the Most of Your Student Loans

Saying there's an upside regarding student loans is almost like rooting for the villain in a movie. Or hoping the long suffering underdog gets crushed. Or proclaiming a dislike for cute cat pictures. It’s just not a popular move. But there are some obvious – and perhaps not so obvious – benefits to having student loans.

You make more money

Here’s a good statistic to keep in mind when you agonize over making those monthly student loan payments: A worker with a bachelor’s degree earned an average of $1,066 per week in 2012, compared to the $652 weekly paycheck of a worker with a high school diploma.

The Bureau of Labor Statistics also reports unemployment in 2012 for a college grad was 4.5 percent – but nearly double: 8.3 percent -- for those with a high school diploma.

Maybe this will bring it home even more. According to a Georgetown University study, a Bachelor’s degree is worth an average of $2.8 million over a lifetime. That’s a premium of 84 percent over a high school diploma. There’s even more value in a graduate degree.

You’re building a (hopefully good) credit history

Making timely payments on your student debt builds your credit history and enhances your credit score. OK, that’s a no-brainer. But without student loans, most college grads have little more than credit card debt, and we know where that can lead.

If you’ve been dutifully paying your student loans, it can cushion any credit damage that a small slip – or a giant slide – on a credit card balance might inflict.

How to reduce the interest on your loan without asking

You may have consolidated, refinanced and otherwise restructured your student loans to where you feel you have no more options available to you in getting them paid off as quickly as possible. If you are weary of the burden of student loan debt there is a way to reduce your interest due – and you don’t have to fill out any applications or get anyone’s permission. How? Make extra payments.

Now stick with me. It’s not as bad as it sounds. If you are seriously looking to clear your student debt, making an extra payment every now and then – or even better, regularly – can save you thousands of dollars in interest over the term of the loans.

But before you make that extra payment, ensure the lender will apply it most efficiently to your outstanding debt. If you have multiple loans billed by the same loan servicer you’ll want to instruct them to:

  • Apply your overpayment to the loan with the highest interest rate
  • If that loan becomes paid in full by the overpayment, any remaining funds should be applied to the loan with the next highest interest rate
  • Any subsequent overpayment should be applied according to the same instructions

The Consumer Financial Protection Bureau has a sample letter (Word document download) you can use to inform your loan servicer of your overpayment instructions.

A private loan can get you to the finish line

After considering the value of a degree and understanding the potential positive effects of borrowing at least some of the costs of getting a higher education, you may be motivated to finish what you started.

Perhaps you have a few semesters to go and don’t qualify for a grant or scholarship and can’t get a Federal student loan done for some reason. A private student loan may be the answer.

Working with a lender can help you pay for tuition, books, room and board – even past due tuition bills. If you go to school part time (but at least half time) it’s worth looking into. A co-signer, such as a parent, can help you qualify for lower rates, too.

Student loans can be the cost of admission to a career of higher earnings. In that case, it can be a debt made without regret.

Hal Bundrick, NerdWallet

Click here to learn more about  student debt control or  call our Student Loan Center 888-549-9050

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About Author

Bill Burpeau
Bill Burpeau

Bill Burpeau is a Financial Wellness Coach at Hanscom FCU. As a Credit Union Certified Financial Counselor, he is an enthusiastic advocate of everyone being engaged in their financial health, educated and empowered to make the best financial decisions for themselves every day. He constantly studies and is up to date with the latest financial management concepts and technology. Bill is a graduate of Texas A&M University with a BBA in Business Management and served in the U.S. Navy as a Supply Officer.

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