Many college students borrow money to help pay for their education. If you are graduating with student loan debt, you may be overwhelmed by the amount you owe. Six months after you stop taking courses (at least half-time) -- whether or not you've graduated -- your federal student loan bills starting coming due.
Failing to pay your federal student loan on time is very costly. The government charges late fees, and -- if you let your bills go unpaid for too long -- collection fees. And, of course, they report your delinquency to the credit bureaus, which makes it hard for you to get a credit card, car loan, mortgage, or, in some cases, certain kinds of jobs.
The good news is that there is no penalty for paying down the loan ahead of time. And the government has many different kinds of payment plans that can reduce the pain of those bills.
These tips may help you repay your loans faster than you think.
1. Use student loan exit counseling. Before leaving college you are required to attend student loan exit counseling. Use this opportunity to make sure you understand your rights and responsibilities for student loans repayment.
2. Pay attention to paperwork. Make sure your lenders have your correct address. Always read everything they send to you, and correct errors promptly. Complete forms on time, and know when you need to start paying back your student loans.
3. Review all your loans. Order your loans from those with the highest interest rates to the lowest. If you can afford to pay more than the minimum, put your money towards the student loan with the highest interest rate.
4. Accelerate your payments. Resist the temptation to spend your whole paycheck, and instead use spare cash to increase your loan payments. This will reduce the total amount of interest you pay.
5. Go for graduated payments. A graduated student loan repayment plan means your payments start off low, and are raised every two years. This strategy works well if your income will likely increase steadily.
6. Consider consolidation. Consolidation lets you combine several federal loans into one. This may lower your interest costs, particularly if some of your loans have a variable rate. You may risk losing the deferment and forbearance rights of your current federal loans if you consolidate.
7. Delay with a deferment. A deferment lets you temporarily suspend your loan payments. Unemployment or economic hardship may qualify you for deferment, as well as being in school, pursuing graduate studies, or being in an internship or residency program. Working mothers and those on parental leave may also qualify. Check whether you will still be charged interest while your loan is in deferment.
8. Keep on top of payments. If you miss payments, you may incur financial penalties, which can be especially high if your lender sends your loan to a collection agency. Remember, bankruptcy usually does not eliminate student loan debt.
9. Student loans and your credit score. Making your loan payments on time will help you build your credit score, and may help you qualify for new credit and lower interest rates.
10. Jobs that help you pay back student loans. Here are several occupations that may help you get some of your debt forgiven:
Your student loans help you get the education you need to get a good start in life. By paying them back, they'll also help you build your credit history and help you learn how to manage your money.
In my cursory scan of comments (please forgive me if I've missed it) is there any reference to a loan forgiveness program for individuals who work in non-profits/public service. As someone who has a significant amount of student loan debt, and considers myself fairly savvy about repayment issues, I was surprised to learn about this program.
In essence, if you work for a public service/non-proift agency, you're eligible to have your remaining debt forgiven after 10 years (meaning you've made 120 non-consecutive or consecutive on-time payments)--as long as you've also worked in the sector during the period of repayment (after October 1, 2007).. This program was designed to encourage individuals to work in the public sector. Check it out: http://studentaid.ed.gov/repay-loans/forgiveness-cancellation/charts/public-service. I'd say this is one of those programs that very few people know about, and it could save them significant stress!
Finally, an important point not brought out in the article is how Direct Loan calculates your payments. Sallie Mae uses the standard amortizaion formula where Direct Loan uses a non-standard amortization formula established as part of the original legislation. The bottom line is Direct Loan for the same amount will calculate a higher payment than if the same loan amount was under Sallie Mae. I have done the calculation by hand and have proved this assertion myself. By the way DIrect Loan won't tell you that when you talk to them. Check the original legislation it is there in black and white.
If you couldn't figure that out on your own, no college should have accepted you to begin with.
I can't get enough of you Jodi! What you offer to the future leaders of the world by educating parent's on the process of finding a way to afford a college education for their child, in addition to the support you provide is invaluable!
Thank you for keeping this mom up to date and on target to finding higher academic success for my teen!
Even if you took a giant eraser and made the provincial subsidies disappear, the cost of Canadian education would still be lower than it is here because there's less mandatory sports worship. A very few schools in the USA have star sports teams that pay their own way, huge arenas and all, but mostly they're subsidized by tuition from other students.
It's possible to get an education in Alberta without going into debt. If you're willing to start working and saving at age 13, set aside half of everything you make, live at home with your parents while studying, work 20 to 30 hours a week while in school, and have a full-time summer job, then it's possible to graduate with no debt without being a major burden to family. Yet this pay-as-you-go education concept is not a model that will ever work in the USA.
Very few American students are willing to give up on "the college experience" because it's more fun to live in a dorm and party for four years straight. Few American parents are willing to have little Snookums around for four years, much less suggest that he or she accept the indignity of going to school in-state, or (gasp!) WORK. It's easier and more fashionable to go into debt.
No mention of STEM jobs in this list. When is Huffpo going to swallow it's pride and admit that liberal arts degrees offer nothing in the way of job prospects and guarantee a life time of crushing student loan debt?
If such an amount represents a 'crushing burden' that will ruin your life, then your parents should never have let you venture outside of your room.
To appreciate how radically different a world college students from 2000 - present are in when compared to people who graduated earlier, check out this article: http://articles.businessinsider.com/2011-01-19/markets/30101621_1_industry-inflation-guess
It's reflecting a 100% increase in the cost of average tuition between 2000 and 2010....
$22,900: Average student debt of newly minted college graduates.
While it is true that college tuition costs have gone up, this is due in part to increasing attendence at for-profit diploma mills (e.g., University of Phoenix, National University, etc.)
The original amount of my college loans, 30 years ago, was $16,000 but as interest was compounded over the years I ended up paying a total of $48,000 to the banks, over the life of the loan. The original amount of my loan ($16,000) was paid off 23 years ago and the remaining $32,000 I paid out were for late fees, penalties and to pay off the ballooning compound interest rates.
Hardly a day passed when I didn't get a hostile call from a collection agency. To stop being hounded by collection agency vultures, I ended up agreeing to payment plans I couldn't afford which resulted in more penalties and fees being assessed.
The IRS withheld all my tax refunds because of my delinquent loan. None of the withheld IRS refunds were applied to pay off the college loan. It was just a nasty little punishment that made it harder to pay my loans off.
Social Security threatened to withhold my future retirement benefits.
I spent my most productive wage earning years living hand-to-mouth while locked to the ball and chain of a college loan. Thank God I'm finally free and my only advice to college students is to think long and hard before you take out any more college loans.
My point... All these really smart college grads unable to pay back their loans, spending fortunes they didn't have for degrees that may be worthless.
Clearly a degree does not mean people are any smarter than when they started !
Trade/blue collar people rule !
Obama is sure to get re-elected and the private sector is doing fine. Everybody should be in their dream job making six figures right after the election !