Student Loan Discounts – What Are They and How to Get Them

Did you know that approximately 70% of students who are eligible for student loan discounts lose out on those discounts within the first year of loan repayment? Or that only about 20% of those students eligible to receive a discount for making their payments on time, actually do so?

Yes, it’s in the fine print. Let me walk you through some of the best tips on how to get those student loan discounts.

Make your first payment on time! Did you know that most students who lose a loan discount do so by missing their very first payment? Yes, that’s right! They simply “blow-off” their very first student loan payment. That lost one-time loan discount, based on a $10,000 loan @ 6.8% and a 10 year term, can be equivalent to $380.17 or even more!

Make your next 35 – 47 payments on time! Lenders often will provide you with a loan principal reduction if you have made 36 – 48 payments on time. On a 10 year term of a $10,000 loan, that savings amount could be approximately $703.44 or even more!

Use the lenders or banks direct payment option! Lenders will often grant to you a 0.25% interest rate reduction during the months you authorize a direct withdrawal from your checking or savings account. Take full advantage of this discount starting with your very first student loan repayment.

The bank will make your last six monthly payments! Yes, simply by making all of your monthly payments on time, you may be eligible to have your final six note payments waived resulting in a $690.48 savings or more on that 10 year loan.

Get your interest rate reduced by 2%! Some lenders will reward your prompt payments by giving you up to a 2% interest rate reduction on your outstanding loan balance, after 36 – 48 consecutive monthly payments. Over the last six years of a 10 year loan term, that could equate in a $527.79 or more savings!

Check with you student loan advisor! Some colleges have negotiated certain discounts for their students. Be sure to ASK your student loan advisor for more information.

Don’t consolidate your loans the first year! You may lose out on a number of student loan discounts when you consolidate your loans. Avoid the temptation to consolidate unless you have read and understand all of the discounts you may forfeit. You can’t blame the lender for withdrawing incentives to do business with them if you jump to a different lender.

Fees can be waived! On The Stafford Student Loan, many lenders will agree to waive a 1% loan guarantee as well as other loan origination fees when you use their direct debit method of loan repayment. The lender may also require you to receive your loan statements electronically.

1.5% rebate after 12 on time payments! The US Department of Education may offer to you a 1.5% rebate after your first 12 consecutive on time payments. That rebate is applied directly to your outstanding loan balance. Be sure to ask your loan advisor for more details.

Ask about a graduation credit! Yes, simply by finishing college you may qualify for a one-time 0.5% credit (basically a reduction of the outstanding balance) as you begin to make your loan payments.

A forbearance or loan deferment can cost you! Your student loan discounts may be adversely affected when your loan goes into forbearance or is deferred. Check with your student loan advisor for more information.

Rebates or discounts that must be repaid! Your original loan document likely has provisions that if you refinance or consolidate your student loans prior to their term, or if the outstanding refinancing loan balance is more than $600, you may be required to repay rebates and/or discounts that have been paid to you. Simply be aware that this could occur.

Minimum loan balances to qualify for discounts or rebates! Check with your lending agency to find out the minimum loan balance that is required for you to qualify for rebates or discounts. The very best discounts are often reserved for the students who borrow the most!

Four Student Loan Types and How to Get Them

Those entering their final year of high school have a lot to think about. Where do I go from here? What college can I attend to achieve my goals? And while discovering the answers to these questions is hard enough on its own, so is finding the financial means to make those answers into a reality. College these days is not cheap – even if you go to state-sponsored colleges – and often the only choice you have left is taking out a student loan. Luckily the government and banks have created several options.

Types of Student Loans

Generally speaking, there are two types of loans that you can take: federal loans and bank-sponsored private loans. Each has its advantages and disadvantages, but both types of loans can help pay for everything from books to living expenses to basic tuition and fees.

Any of these student loans that you choose to take carries the same repayment agreement. That is, you do not need to pay back a student loan, public or private, until 6 months after graduation. Also, the interest rates are very low and in some case fixed, allowing for a better prediction of your financial obligations after school. Taking a student loan to pay for college is clearly the way to go and there are four major options that you can consider.

Federal Stafford Loan

The most popular loan taken by college students is the Federal Stafford Loan which comes in both subsidized and unsubsidized forms. The subsidized Stafford Loan does not begin to accrue interest until after graduation whereas the unsubsidized version does accrue interest while you are still in school. The interest rates on Stafford Loans are low and fixed and they are available directly through the Department of Education. Whichever school you ultimately choose will help you get this loan through their Financial Aid office. Stafford Loans can be given up to the amount of $20,000 each school year. They are available to anyone who wants one, though subsidized loans are given based on financial need.

Federal Perkins Loans

The next option is a need-based loan also sponsored by the Federal government, the Perkins Loan. This loan is only available to those who meet certain criteria in terms of income (and parental income) and a standard formula will be employed by your college’s financial aid office to determine what amount you qualify for. Because of the nature of Perkins Loans, which are given on a first come, first served basis, and the special needs-based formula, it is important to apply for these loans early.

Federal Plus Loans

The Federal Plus Loan operates much like the Perkins Loan, in that it is need-based. However, rather than being taken out by the student, Plus Loans are given to parents wishing to pay for their child’s college education themselves. Plus Loans are determined based upon the parents’ financial situation and income in addition to how many children they have attending college.

Private Student Loans

The final option is student loans provided by private banks. These lenders – who also serve other loan needs such as home and car loans – review your FAFSA form and then provide the amount of money that a student or parent needs. These loans are generally used when Federal options are insufficient to pay all college expenses, such as at private colleges, and will be determined based on the same criteria that the financial institution uses to make any personal loan. These loans generally do not carry a fixed interest rate, however, so it is important to exhaust the federal options first.

Taking a Loan

Going to college is a really big step in a young person’s life, but so is taking a student loan. Make sure that you understand all repayment obligations before you take money for school as failure to repay student loans can negatively impact your credit in the future.