Graduating and getting your diploma is a tremendous achievement and you deserve a pat on the back.
But don’t rest on your laurels for too long before you start considering how to start paying and staying ahead of your student loans.
You will want to avoid fees and extra interest costs, keep an affordable payment and protect your credit rating.
This article will help you keep your student debt in order and give you some advice if something does go wrong.
Keep Abreast of Your Loans
Make sure you keep track of the lender, balance, and repayment status for each of your student loans.
Knowing the details and terms of your loan will let you know your options for loan repayment and forgiveness.
If you don’t know the exact details of your loan be sure to ask your lender or visit www.nslds.ed.gov.
You can log in to the above website and see loan amounts, lender(s), and repayment status for all of your federal loans. If some of your loans aren't listed, they're probably private – i.e. non-federal – loans.
For private loans try to find a recent billing statement and/or the original paperwork that you signed.
As a final resort contact your school if you can't locate any records.
The Loan Grace Period
Different loans have different grace periods.
A grace period is how long you can wait after leaving school before you have to make your first payment.
For federal Stafford loans – AKA subsidized and unsubsidized loans – the grace period is six months. For federal Perkins loans the grace period is nine months.
For federal PLUS loans, you can most likely get a six-month deferment.
There is a wide variance in grace periods for private student loans. Make sure you check your paperwork or contact your lender to find out.
Don’t make a mistake and miss a payment.
Keep Your Lender In The Loop
Always let your vendor know when you move or change your phone number or email address.
You could potentially get penalized a lot of money If your lender needs to contact you and your information isn't current.
Make sure that you open and read every piece of mail – paper or electronic – that you receive from your lender about your loan.
Ignoring bills or serious problems can lead to default, which has severe, long-term consequences
If you find yourself falling behind and getting calls from your lender or a collection agency – don’t dodge the contacts – instead try to work out a new plan with your lender.
Lenders are supposed to work with borrowers to resolve problems, and collection agencies have to follow certain rules but avoiding the situation is never advisable.
Pick the Right Repayment Option
For federal loan payments will automatically be based on a standard 10-year repayment plan.
If this standard payment proves difficult, there are other options, and you can change plans down the line if you want or need to.
While extending your repayment period beyond 10 years can lower your monthly payments you'll end up paying more interest – often a lot more – over the life of the loan. That’s money you are flushing down the drain.
Some important options for student loan borrowers are income-driven repayment plans such as Income-Based Repayment and Revised Pay As You Earn.
These options cap your monthly payments at a reasonable percentage of your income each year, and forgive any debt remaining after no more than 25 years -depending on the plan -of affordable payments.
Private loans are not eligible for IBR or the other federal loan payment plans, deferments, forbearances, or forgiveness programs.
However, the lender may offer some type of forbearance, typically for a fee, or you may be able to make interest-only payments for some period of time.
“College is ingrained in the American dream, it shouldn't turn into a financial nightmare”
There Is Always Help
Let’s face it – life happens and not always in the way that you hope it will.
If you become unemployed, have health issues or fall onto some other financial hardships there are options for managing your federal student loans.
There are legitimate ways to temporarily postpone your federal loan payments, such as deferments and forbearance.
For instance if you're having trouble finding work right now an unemployment deferment might be the right choice for you.
This isn’t a cure-all however- interest accrues on all types of loans during forbearances, and on some types of loans during deferment. This has the unpleasant effect of increasing your total debt.
A better solution may be to ask your lender about making interest-only payments if you can afford it.
If you have a job but expect your income to be lower than you'd hoped for more than a few months, check out Income-Based Repayment. Your required payment in IBR can be as little as $0 when your income is very low.
Also, these options are advantageous if you plan on having much of your loan forgiven. Why pay more than you need to.
Student Loan Summary
As long as you keep your lender in the loop, make sure you know the details of your loan and have a plan in place for unforeseen events you will be able to pay back your students loans and enjoy the hard won fruits of your labor.
Make sure you are diligent and you will never fall behind or get into a situation that will cost you more in the end.