With rising tuition fees and living costs, education loans have come to be a sinew in the survival of a single student. Yet managing one's monthly EMI can prove to be quite problematic for many freshly graduated students and those with entry-level jobs. Here are some ways to ease education loan repayment.
1. Longer Loan Tenor
The easiest way to reduce EMI would indeed be a longer tenure while that would certainly increase the payback over time, the biggest cut down on the monthly EMI would be such that it is easily serviceable for the student in the starting career. Very many are now offering up to 15-year tenures that are bringing relief to the cash flow of the customer.
2. Moratorium Period
Most of the Banks offer a moratorium period that is essentially the gap of 6 months to a year after graduation before which there is no requirement to make any EMI payment. It allows fresh graduates to secure stable employment before they start repaying. If you can't pay the full EMI right after finishing your study, ask your lender for an extension of the moratorium period. As indicated, this duration is served, but interest will continue to be accrued on the loan, thus potentially increasing the total amount of interest to be paid in full.
3. Consider Income-Driven Repayment Options
Many banks offer loan options with the benefit of income-driven repayments where EMIs are adjusted according to the income of the borrower. It does allow for flexibility in repayment, based strictly on initial salary. As the income increases, repayment amounts would increase as well; this would not become burdensome for the student, allowing for sustainability without too much financial stress. Such options can be sought at the time of application or requested from your lender for available choice.
4. Select Loan Consolidation or Refinancing
If you have more than one loan or an education loan with a high interest rate, try consolidating or refinancing it for better terms. Refinancing a loan shifts your loan to a lender who provides interest rates that are lesser. So it can cut down EMI significantly if the interest rates have fallen since the loan was taken. Refinancing also gives borrowers a way to extend their loan tenure, thereby reducing EMI further. Check the processing charge and other costs involved in refinancing-beneficial or not.
5. Pay Extra
Pay more than the EMI amount whenever you can. Even small extra payments add up and reduce the principal, which in turn means less interest burden. Bonus or a financial gift from family members? Suggest that a part of it be paid once towards your education loan. This saves time and reduces the loan tenure and total interest outlay.
6. Employer Assistance Programs
Some employers do offer student loan repayment help as part of the employee benefits. Companies under such programs will either pay a portion of the loan or provide matching payments towards the employee's loan repayment. Such programs are more common in larger organizations, but it is worth exploring this option with your current or potential employer.
It can be possible to minimize EMI payable on education loans with proper planning and constant follow-up with lenders. Long tenures, moratoriums, income-based repayments, and refinancing are some of the alternative options in hand for students to reduce the burden on the monthly EMI payment.
