Graduating from college is one of the most exciting times in your life. You’ve gone from studying all day to being out in the real world. WooHoo!
But that also means you have to find a job and start paying back those loans. That’s definitely not exciting at all!
Luckily, we’ve prepared a few tips that will take the idea from scary and overwhelming to manageable (but probably not fun…sorry…we can’t work miracles).
So for just one more time, sit back and take some notes; there won’t be a test at the end, but you’ll be thankful when we’re done.
1. Start with the basics
The first few things you need to know are probably the most important. You need to know how much you owe and to who. You’ll also want to know what type of loan you have. With this knowledge you will know the balance you owe (and at what interest rate), who your lender is, and the rules for repayment you must follow.
If you’re unsure, you can talk to your lender. Or, go to nslds.ed.gov. This website will show you all the federal loans you owe, but not any private loans. To learn more about your private loans either dig through your old paperwork, or give your college a call.
2. Know your time limits
All loans have what’s known as a grace period (or deferment). After graduation, students have a grace period—a predetermined amount of time before payment on the loan must begin.
For example, you have six months for any federal Stafford loans, and you have nine months before paying for federal Perkins loans.
Private loans and federal PLUS loans are a little different and you might have to contact your school about those. Either way, it is crucial that you don’t miss your payments! This is your credit score we are talking about!
3. Keep a healthy relationship with your lender
Often times on TV we are told to be afraid of the person who leant you money, but that’s exactly the opposite of what you should do. Stay active with your lender. For example, if you move, change your phone number, or change your e-mail address, you should tell your lender so that there are no communication gaps.
If you miss messages from the lender regarding your loans, it could put you in a pretty bad situation. Also, don’t ignore those bills when they come in the mail. You don’t want to default on your loans—something like that will affect you for a long time!
4. Pick a payment plan you can work with
When you start receiving bills for your loans, they will be based on the standard repayment plan. The standard plan involves a 10 year payback period. But not all of us have the funds to make that happen.
If you think the monthly payment amount is pretty steep, don’t panic. There are ways for you to extend your payment period which can reduce your monthly payments. Lower payments January help to take the pressure off of your shoulders (this option is for federal loans, private loans are a little different).
You January have to pay a fee, but you should definitely talk to your lender about it. To find out more about these options, check out IBRinfo.org.
5. Take a deep breath
We understand that the real world can be a little tough. If you’re having a hard time paying your loans due to being unemployed or other financial problems, there are still some options for you. Your lender would much rather wait than have you default!
These options are deferments and forbearance. These can temporarily stop the bills from coming while you get a chance to get back on your feet. The only catch is that your interest will still build up over time. You can also look into Income-Based Repayment. Just talk to your lender.
6. Play it cool
Once again, we’d like to take a moment to remind you that defaulting on your loans is a terrible idea. With federal loans, you automatically default if you go nine months without making payments.
We keep saying default is bad, but what happens when you default? Here’s what will happen: your credit score will hit rock bottom, the government will start taking money out of your paychecks, they will take your tax returns, and the total you owe will greatly increase. If you’re in trouble, talk to your lender right away and go to studentloanborrowerassistance.org.
7. Paying a little extra will pay off in the end
Making loan payments works a little different than you January think. When lenders receive your money, your interest and fees get paid off first. Any left over money will cover the principal–or the actual bill portion of your loan.
In order to pay off your loan quicker, you should pay a little bit more than the minimum payment so that you can cover more of the principal. If you do this, be sure to include a written request, or your lender will just save that money for future payments.
8. High interest = high priority
If you are paying off more than one loan at a time, be sure to focus your energy on the loan that has the highest interest rate. A high interest rate means the longer you are still making payments, the more you will pay in the end.
9. Consolidation, do your homework
One thing your lender January ask you is whether or not you want to consolidate all of your loans into one monthly payment. Before you say yes or no, be sure to do some research and see if it will fit you.
Read a few articles online, talk to your lender, and possibly ask your parents for advice. These are tricky questions, and you need to be informed before you make a decision.
10. Forgiving loans
There are a few programs that will forgive some or even all of your loans if you work in a certain area or for certain employers. For example you January want to look into ‘Public Service Loan Forgiveness’, it requires a little work, but think about the benefits in the end.
To explore other options for loan forgiveness go to IBRinfo.org and you’ll see many options that January suit you perfectly.
You January have thought that college graduation meant you could put all those brain busting tasks to rest. While loan repayment January require a bit of thought and research at the beginning, the stress won’t (hopefully!) plague you for long.
Figure out what you need to do to repay your loans and then do it. You’ll be so much happier (and richer!) once those loans are paid in full.
Lindsey Dahlberg works for Ziegler Law Office, a Clearwater debt relief lawyer, providing loan modification information to clients. She has helped many students secure debt relief and eventually financial freedom.