Whether you just graduated, you're taking a break from school or you have already started repaying your student loans, these tips will help you keep your student loan debt under control.
1. Know your loans.
It's crucial that you keep track of the lender, balance and repayment status of each of your student loans. If you're not sure, ask your lender or visit NSLDS.ed.gov. You can log in and see all this information.
2. Know your grace period.
A grace period is the amount of time between leaving school and the due date of your fist payment. It's six months for federal Stafford loans. For federal parent or PLUS loans, there is no grace period.
Grace periods for private student loans vary, so consult your paperwork, or contact your lender to find out.
3. Stay in touch with your lender.
Whenever you move or change contact information, tell your lender right away. If your lender needs to contact you and your information isn't current, it can end up costing you a bundle.
Read every piece of communication you receive about your student loans. If you're getting unwanted calls from your lender or a collection agency, don't stick your head in the sand. Take the calls.
4. Pick the right repayment option.
When your federal loans come due, your loan payments will automatically be based on a standard 10-year repayment plan. If the standard payment is going to be difficult for you, there are other options.
Read your original private loan paperwork carefully, and then talk to the lender about what repayment options you may have.
5. Don't panic.
If you're having trouble making payments because of unemployment, health problems or other unexpected financial challenges, you have options for managing your federal student loans.
There are legitimate ways to temporarily postpone your federal loan payments, such as deferment and forbearance. Just keep in mind that the interest will continue to accrue and be added to the principal amount, even though your payments may have been suspended.
6. Stay out of trouble.
Ignoring your student loans has serious consequences that can last a lifetime. Not paying can lead to delinquency and default. For federal loans, default kicks in after nine months of nonpayment. Talk to your lender right away if you're in danger of default. You can also find helpful information at StudentLoanBorrowerAssistance.org.
7. Lower the principal.
When you make a federal student loan payment, it covers any late fees first, then interest and finally the principal. If you can afford to pay more than your required monthly payment — even occasionally — you can lower your principal, which reduces the amount of interest you have to pay over the life of the loan.
Include a written request to your lender to make sure that the extra amount is applied to your principal. Otherwise, it will automatically be applied to future payments instead.
8. Pay off the most expensive loans first.
If you're considering paying off one or more of your loans ahead of schedule or trying to reduce the principal, start with the one that has the highest interest rate.
If you have private loans in addition to federal loans, start with your private loans, since they almost always have higher interest rates.
A consolidation loan combines multiple loans into one for a single monthly payment and fixed interest rate. If this is appealing, make sure you know all of the pros and cons first. You can consolidate your federal student loans through the Direct Loan program. They have an online calculator to help you figure out what your interest rate would be.
10. Loan forgiveness.
Public Service Loan Forgiveness is a fairly new program that purports to forgive federal student debt in certain situations. There's a lot of misinformation out there making forgiveness appear to be a viable option for just about anyone. Since the program began, 99% of the applications have been rejected. Find out more at IBRinfo.org.
Best advice: Don't count on your loans to be forgiven, canceled or paid off for you. Instead, create a plan, and then buckle down so you are out of debt as quickly as possible.
Mary invites questions, comments and tips at EverydayCheapskate.com, "Ask Mary a Question." This column will answer questions of general interest, but letters cannot be answered individually. Mary Hunt is the founder of Debt-Proof Living, a personal finance member website and the author of the book Debt-Proof Living, Revell 2014. To find out more about Mary visit the Creators Syndicate Web page at www.creators.com.
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