Student loan debt in the US has more than doubled over the past two decades. Although ranking second to mortgages, federal student loans exceeded $1.6 trillion in March 2023. The total amount reached over $1.7 trillion when factoring in private student loans.
Interest on most federal student loans paused when the COVID lockdown started in the US in March 2020. Temporarily, the freeze gave borrowers a zero percent interest rate on their student loans. But student loans are accruing interest again after the three-year hiatus.
That also means student loan repayments will resume beginning in October 2023. The resumption of interest and payments will likely impact household finances. For millions of individuals, it entails additional payments of approximately $300 to their monthly budgets.
Moreover, financial experts anticipate an increased reliance on technology as the student loan repayment pause ends. This article will explore the significant role of fintech and how it makes repaying student loans more manageable.
What You Need To Know About Fintech
Financial technology, or fintech, is an all-encompassing term that refers to the application of new technological advancements, such as software and hardware, to products and services in the financial sector.
At its core, fintech is designed to improve and automate the operations and processes of financial services. It has an array of applications in the financial industry, ranging from simple mobile banking and insurance to complex cryptocurrency and investment apps.
The inner workings of fintech products and services differ. For instance, fintech lending companies utilize artificial intelligence and big data to streamline financial transactions for borrowers and lenders. It enables potential borrowers to apply for financing solutions from any location worldwide.
Leading fintech firms have also transformed the student loan industry with innovative approaches and tailored financial products and services. Read on to learn how using fintech specifically impacts student loans and gets borrowers back on track with repayment.
How Fintech Makes Student Loan Repayment Easier
Traditionally, acquiring a student loan involves reaching out to a bank or financial institution. However, the eligibility criteria of these traditional providers are often difficult to fulfill.
Thanks to the inception of fintech companies, there are more affordable options for refinancing student loans and the following new approaches to repayment:
Easy-to-read comparison tool
Instead of managing multiple student loans with different interest rates, balances, and terms, student loan refinancing allows you to combine them into a single loan. The new refinanced loan typically comes with a lower interest rate.
Repaying your student loan debt every month will be easier with a reduced interest rate. However, getting yourself the best rate still requires thorough research and comparison of various options. The good news is that many fintech platforms have easy-to-read comparison tools.
With such tools, you can easily view and compare multiple student loan opportunities and find the package that suits you best. Likewise, calculating your potential loan payment is more straightforward, helping you make informed financial decisions.
Automated underwriting
Automated underwriting, integrated with many fintech platforms, is a game-changer in the student loan repayment process.
It’s a technology-driven underwriting process that generates a student loan decision based on the details submitted to the system. As a result, lenders can gain a detailed understanding of your creditworthiness, enabling them to offer fair and personalized terms.
With a loan specifically tailored to your individual needs, you can have a more user-friendly experience and acquire the most suitable options for repayment. Strategically planning loan repayment schedules based on one’s financial capacity is also possible.
Since automated underwriting eliminates human interference in student loan processing, it also reduces operational expenses, leading to competitive interest rates and lower monthly payments. This can help you put in extra dollars to expedite student debt repayment.
Automated payment systems
Student loan repayments become more manageable through automated payment systems. Many fintech platforms allow you to set up automatic payments based on your preferred schedule. For instance, you can choose to make one-time monthly or weekly payments on your student loans.
With an automated payment system, you can better manage or control your student loan debt according to the agreed-upon terms and conditions. Since it also lets you track your repayment progress, you can adjust your student loan repayments as needed.
The Bottom Line
Fintech companies undoubtedly bring numerous positive developments to the student loan financing industry. Taking advantage of lower interest rates, flexible repayment options, and personalized financing tools can make your monthly student loan payments more manageable.
Still, researching and using all available resources is crucial to putting yourself in a more advantageous financial position. Remember that fintech companies seek to make a profit while providing you with refreshing methods for paying back your student loans. Nevertheless, taking proactive steps and staying informed helps you make the most of these innovations, ultimately conquering your student loan debt.
