Tips for Paying Student Loans
Whether you’ve recently graduated, taking time off or dropped below half-time status, chances are the notion of repaying your student loans has probably crossed your mind. Most all federal loans have a grace period which is the determined period of time after you graduate, leave school or credits/hours drop below the required number that you must begin repayment on your loan. Perhaps paying loans is new to you, the grace period allows you some time to get financially secure post-school and establish a repayment plan. For others, you might already on a repayment plan that seems a vicious cycle eating away at hard earned income.
Whichever category you fall into, chances are you want your student loans to go away fast. Everyone’s situation is unique, so your plan of attack will depend on how much you owe against how much you earn (and can repay each month!). Check out the following tips for how to tackle those student loan payments…
Know Your Loans & Grace Period: It's important to keep track of the lender, balance, and repayment status for each of your student loans. These details determine your options for loan repayment and forgiveness. If you’re graduating or changing hours or enrollment status, know your grace period. Different loans offer different grace periods.
Carefully Choose Your Repayment Plan: When loans come due, payments are typically automatically based on a 10-year repayment plan. If the standard payment is going to be difficult for you to make each month, you can request to extend your repayment period beyond 10 years. Income-Based Repayment and Pay As You Earn repayment plans, as well as other forgiveness programs are available.
Don’t Panic (or Ignore Payments!): Having trouble finding work? Health issues or other financial challenges? There are options for temporarily postponing your loan. Contact your lender to find out how, but whatever you do, don’t avoid making payments. Ignoring student loans can have major consequences on your credit score and overall financial health.
Pay Expensive Loans First, Prepay if Possible: If your goal is to pay off one or more loans ahead of schedule, pick the one with the highest rates. If you have private and federal loans, start with private since they lack the flexibility and other benefits of federal loans. In either scenario, try to prepay whenever possible. Whether you can pay more than the minimum every time or want to pay a larger chunk every so often, every little bit extra you can put in helps!
Consolidation & Loan Forgiveness: For some it’s appealing to consolidate multiple loans into one monthly payment with a fixed interest rate. Be mindful consolidating federal and private loans as this can void unemployment deferments, special programs, flexible repayment options and borrower benefits. If you work in certain fields, there are federal loan forgiveness programs that excuse debt remaining after 10 years of qualifying payments.
Student loans are a major part of post-academia adulthood and paying them responsibly is critical to your financial future. Do yourself a favor and gain a solid understanding of your loan terms and payment schedule well before your grace period begins. These tips will not only help you pay down debt faster, you’ll avoid fees and interest that accrue over time, keep payments manageable and affordable, as well as protect your credit score and overall credit health.
For more resources on student loan payment strategies and other ways to protect your credit, contact RiverTrace today at (804) 266-2767.