Congratulations graduates! Your six month grace period is over and it’s time to start paying back your loans. For those of you starting college next year, it’s time to begin looking for loans to cover tuition, books, housing and other costs. After all, November is Scholarship Month. Regardless of where you are on the student loan merry-go-round, there are certain points you have to remember and follow:
First, you have to understand what loan or loans you have. There are many different loans, both federal and private. There’s no need to become an expert on them all (that’s why we’re here), but you absolutely need to know the details of yours. At the minimum, you should understand your monthly payment amount, payment date, and interest rate. If you are applying for loans, this is especially important now, so you can try to match future payments against a realistic assessment of what your earning power will be in four or five years. If you are starting to repay, this will let you know if it’s time to join thousands of recent graduates and start looking for a second job.
Next, establish a goal to pay off your plan on time or earlier if at all possible. Although more than half of loan holders pay them off on time, the number of people who are either behind on their payments or actually in default on their loans is increasing. Budget now for your loan amount and just a little bit more if you can. It pays off when it comes to reducing both the term of your loan by several months or even a year and the amount of interest you will pay on it.
If it turns out that you can’t meet the original monthly payment amount, then you need to find a plan that will allow you to make your payments and keep your credit score intact without breaking your budget. For private loans, you’ll need to go to the lender and work out the best deal you can. Since no bank or lending institution wants a bad loan on their books, most will work with you to stay on track. Some of them will even let you make payments while still in school to give you a pad against difficulties after graduation.
Know Your Options
For federal loan holders, there are many options to keep up with your payments and still be able to take care of your family and build a secure future. Income Based Repayment keeps your monthly payment at no more than 15 percent of your discretionary income and considers the size of your family as well. Income Contingent Repayment considers all of this as well as if you have decided to pursue a career in public service.
Stick to the plan! Late fees usually begin at around $25 for each month. That’s three hundred dollars every year until you catch up. That fee will be included even if you are just one dollar short. The best way to make sure you don’t miss is to enroll in an automatic payment program. Your payment comes out before you have a chance to spend it; even better, those graduates who enroll often qualify for a lower interest rate for the entire time they are in the program. This can be as much as 0.25% point reduction, which means a savings of hundreds or even thousands of dollars over the lifetime of the student loan.
Finally, if you are going to miss a payment, call your loan servicer before it happens. If it’s something that really is beyond your control, such as an auto accident or getting a layoff notice from work that starts tomorrow, private lenders can give you a one or two month grace period while you get things straightened out with your insurance company or find new employment. Even if it’s something else, both federal and private lenders have a number of options to help you with your loan payments and keep your credit score above 720.
These five points are needed for everyone with student loans or those students and parents now looking for financial aid to pursue college. Student Debt Relief can help you with these and to get you through the process of applying for the best loan options available to you. Good luck!