To find out the ways to deal with outstanding student loan debt is not such an easy process as it sounds. You may hear of a wide range of alternatives such as student loan forgiveness programs, student debt relief, some kinds of discharge or student loan cancellation, etc. Each of them has specific requirements and eligibility conditions which is quite possible that they are inconvenient for your current financial situation. Especially, when you find yourself in the circumstances with economic hardship, and you feel challengeable to make repayment on your debts, then things start an entirely different way and lead to more severe problems. However, there is one more alternative such as on-time payment which has some significant advantages. In this post, we are going to look around how on-time payment discount for student loan forgiveness could be beneficial and where you can find it.
What is the one-time payment discount and why it is so important?
Before getting into the details, let us have a look at some points on why payment discount for is so significant. The first and forefront advantage of the one-time discount is that it is an excellent opportunity to be eligible for student loan forgiveness programs. Loan forgiveness is the most effective and powerful weapon to get rid of a massive amount of debts. It may allow you to get out of debt and become debt-free ultimately. So in terms of student loan forgiveness, on-time payment discount has a significant role.
But it worth to keep in mind that loan forgiveness is available for only federal student loans. On the other hand, for people who have borrowed money through private lenders, on-time payment discount makes them free from co-signer release. Final and I think the more important benefit that on-time payment discount could provide is that you will see an increase in your credit score.
If we take into account that credit score is the essential factor in terms of other opportunities such as getting different types of forgiveness, taking other kinds of credits, even finding a rent for a house.
How does on-time payment discount work?
On-time payment discount works in quite a simple way, but it has some difference in the concept. Thus, in contrast with the loan feature that you receive while you are taking student loan credit, on-time payment discount is earned. To receive on-time discount payment, all you are going to need is to make a required number of consecutive payments on your debt balance. On-Time payment discount does not look like loan forgiveness or discharge. You can only get this opportunity as a form of reduced interest rates on your total credit balance. By taking into consideration of the fact that dealing with student loan debts is an important complicated and time-consuming process, then we could say that any bunch of money you save is a quite valuable bonus.
It is worth to mention that the experience of using on-time payment discount come back to 1960s, which was mainly applied by private lender or banks to attract new customers and keep the current borrowers to hold their regular debt payments.
At first sight, it might seem surprising to you how simple the rule is to make on-time payments and save money on your debt. However, only a few people can track their regular debt payments on time regularly. That is why it is a kind of tool which the banks or private lenders offer some discount options to incentivize the borrowers to pursue exact-time of your student loan repayments.
The terms and conditions of regulations related to on-time payment discount may vary by depending on the lenders (no matter private or federal student loan you have taken). For instance, for Stafford loans, if you could be able to keep to make regular payments on your debt for four consecutive years, then the lender will offer you 2% discount on your interest rates. Maybe it would seem too small at first, but consider that the overall length of the repayment period is 10,15, and even 20 years. In this case in lump-sum, this accumulates to the significant amount of saving on your budget.
Where can you find on-time payment for student loan forgiveness?
Actually, in the earlier years of that on-time payment discount is offered by different private or federal lenders, as a form of deductions on principal debt balance, cash, rebates or account credits. However, currently, it quite hard to find a lender who is offering such permanent conditions. It is because, this discount is constant and covers the whole period of credit life span, the lenders are not inclined to make such rate discounts.
As an example, we can show the MPower Financing which is one of the rare loan lenders who still offer on-time repayment discount on for student loan forgiveness. However, the opportunities and options they offer is not so flexible and could not say it has enormous benefits. It is because MPower Refinancing provides only a 0.5% discount on interest rates in return if you have made regular payments on your debts for half years.
On the other hand, to determine the alternatives for on-time repayment discount, it would be better to ask and negotiate with your lender.
What is the possible alternative for on-time payment discount?
As we mentioned, the earlier on-time payment discount has been getting outdated already. But instead, both federal and private lenders such as credit servicer agencies, banks, and other credit institutions have designed new, advanced alternative which is called Autopay options. It is sometimes known as an autopay discount which functions almost the same way with on-time payment discount. When you agree to join Autopay, your monthly payment is automatically taken from your bank account regularly. As a return, the lender provides you a certain percentage of discount the whole amount of credit that you have taken.
What is the solution?
Of course, handling the massive student loan debt balance may be intensely complicated, and it is an excellent idea that you are seeking the alternatives solutions. Here are some examples of the most reasonable ways to eradicate your outstanding student loan debts.
Apply for student loan forgiveness programs -it is the first and forefront options you would be better to choose. There is a wide range of loan forgiveness and discharge programs that you can take your chance.
Consolidation or refinancing – especially if you have taken multiple types of student loan together, then this option might be the best solution for you. Applying for consolidation or refinancing loans allows you to merge several student loans into the unit one with lower monthly payments and reduced interest rates.
Repayment plan – another alternative to deal with your student loan debts is choosing the available repayment plans. For example, for federal loans, there is Income-driven repayment plan which allows you to adjust your income into your monthly payments.
To sum up, by taking all said into account, we could say that you can get several benefits by finding a lender providing an on-payment discount for student loan forgiveness. But if you could not find a suitable one, it would be recommended to check your chance with other options mentioned above.