For most students, taking a loan to pay for college is unavoidable. The majority of students graduate thousands of dollars in student loan debt. And many take as long as 30 years or even more to clear that debt completely. But it doesn’t have to be that way. There are ways you can reduce your total student loan cost and be free from debt earlier. The sooner you clear your debt, the sooner you’ll be free from the restraints holding you back from reaching your other goals.

9 Things You Can Do To Reduce Your Total Loan Cost

1. Explore free money options first

Yes, you can get free money for college but you will need to put in the time to look for it. One of the best free money resources is scholarships. You will have to look for opportunities that you qualify for and then spend time putting together a strong application. But the time and effort you put into it will pay off big time. Any award money you win is yours to keep. You don’t have to return the money nor do you have to pay interest on it. Winning scholarship money is the best way to reduce your total loan cost.

Grants are another free money resource for college. These are awarded by the federal government based on financial need. To avail of federal grants, you must file the FAFSA (Free Application for Federal Student Aid) every year that you’re in college. The amount you’ll receive through grants is based on the information you provide on the FAFSA. Like scholarships, grant money doesn’t have to be returned, which helps to reduce your total loan cost considerably.

Any free money you receive, whether through scholarships or grants, will help to reduce your total loan cost.

2. Prioritize federal options for student loans 

If the total amount you have through scholarships, grants and personal savings isn’t not to cover tuition, you’ll have to borrow money. It’s advisable to always exhaust federal student loan options first before taking on private student loans. This is because federal student loans have lower interest rates, more flexible payment options and better protections compared to private loans. The lower interest rate will save you thousands of dollars over the life of the loan, reducing its overall cost. Only consider private student loans if you still need more funds but have exhausted your federal student aid availability.

3. Shop around for the best private student loans

Unlike federal student loans, private student loans do not have fixed interest rates or fees. These rates vary significantly among lenders. Taking time to shop around and compare rates could save you a lot of money.

When comparing loan costs, don’t just look at the interest rate. Many lenders charge attractively low interest rates but make up for it in hidden fees. Before signing any loan agreement make sure to check the fine print for origination, administration or any other fees. Sometimes the hidden fees can be so high that they increase the cost of the loan significantly.

4. Don’t allow interest to capitalize on your loan

Repayment of student loans typically starts only about six months after graduation. So you don’t have to make any payments while you’re still in school. However, interest starts accruing on your loans from the day the funds are disbursed till they are completely paid off. Capitalized interest increases your overall student loan cost total significantly.

Paying off whatever you can as early as you can is an effective way to lower the capitalized interest. Even small amounts paid regularly can help to reduce the total cost of loan by a lot. The sooner you start repaying the loan, the less it will cost you in the end.

Commit to making payments, however small, while you’re still in school. Use any gift money you get through the year to pay down your debt. If you’re working while studying, put your income towards your loan payments. Even if you can afford to pay just $30 a month, it’s worth it. These small amounts will add up, saving you a substantial sum by the time you graduate.

5. Enroll in Autopay

Autopay is a way of automating your loan payments. It involves authorizing your bank to transfer the loan payments to the lender every month on a specified date. Setting up autopay ensures lenders that they will receive their payments on time every month. Most lenders offer rate discounts as an incentive to borrowers who sign up for autopay. The discount is generally about 0.25%, which doesn’t sound like a lot. But the reduced rate does up over the life of the loan, reducing the total loan cost.

Additionally, setting up automatic payments ensures all your payments go out on time and you don’t miss deadlines. This means no additional fees and fines which would otherwise add to the cost of your loan.

6. Pay more than the minimum every month

Making minimum payments will help you get closer to becoming debt-free. But it won’t reduce your total student loan cost. To reduce the cost of your debt, you must pay more than the minimum every month.

Take time to calculate your income and how much you need to pay towards essentials such as rent, utilities, groceries, and transport. Cut back on unnecessary expenses and see how much you can save every month. Use those savings to pay more than the minimum every month. This will help to accelerate your payoff timeline. The sooner you pay off your debt, the less time there is for interest to accrue. The less interest that accrues, the less the total cost of the loan.

7. Have good credit? Refinance your loans 

If you’ve worked towards building a solid credit score, you can now benefit from your efforts. Refinancing involves exchanging your current student loans for a new loan. The new loan will have new terms and conditions and a new interest rate. The interest rate on your new loan will depend on current market interest rates and your credit score.

If you have a good credit score, lenders will offer to refinance your loans at a lower interest rate. This is because a high credit score is an indication that you’re a responsible borrower and likely to make timely payments. Lenders favor borrowers with good credit and offer them competitive interest rates.

It’s definitely worth checking out refinance interest rates if your financial situation has improved since you first took the loan. Even a marginally lower interest rate could save you hundreds if not thousands of dollars over the loan term.

8. Have spare cash? Choose a shorter loan term

When refinancing student loans, the lender sets the interest rate but you can choose the loan term. Choosing a longer term lowers your monthly payments but extends the loan term and increases the amount of interest that accrues. On the other hand, choosing a shorter loan term reduces the loan term and lowers the amount of amount of interest that accrues. However, it will increase the amount you have to pay back every month. This option for reducing your total student loan cost will only work if you can afford the higher monthly payments.

Be careful about choosing too short a loan term. It will increase your monthly payments dramatically. If you miss a payment because you can’t afford the full amount, you’ll end up paying a higher price in the end. The lender will charge you a fine and interest on the unpaid amount. Moreover, the late payment will damage your credit score, making it more difficult for you to get low-cost loans in the future.

9. Ask about employer assistance

Some employers have programs in place to help employees reduce total loan cost. Employer assistance programs vary widely among companies. Generally, employers pay matching monthly payments towards the employee’s student debt. This may be limited to a certain amount every year or to a total amount over the life of the loan. It’s worth asking your employer if they have any program in place that can help to lower your total student loan cost.

Use College Raptor’s new Student Loan Finder to discover personalized loans. Compare lenders and interest rates to find the ideal student loan for you!