Tomorrow marks the first of May, which means graduation season is just about here. If you’ll be one of the lucky collegiately accomplished, congratulations! You now have about six to nine months until your student loans kick in. Do you have a plan? As you think about your leap into the real world, here are some tips to avoid credit problems when dealing with your student loans.
Student Loan Tips For Recent Graduates
Figure out your grace period. Is it six months or is it nine? Typically for Federal Stafford loans it’s six, but for Federal Perkins loans it’s nine.
Know what you owe. Simply go to https://www.nslds.ed.gov/nslds_SA/ and select “Financial Aid Review”. There you can see your entire history of federal loans. If you’re looking for loans that aren’t there, they could be private so check your recent billing statement or call your school if you can’t locate any records.
Choose a repayment option that’s right for you. There are a lot of options out there. If you don’t think you’ll be able to handle the 10-year standard repayment plan, you can always extend it to 15 years and your monthly payment will be lower. However, you’ll end up paying significantly more in interest. You could also consider an income driven repayment plan which determines your monthly payment by how much you earn each year. Here’s a great run down of all the different repayment options for federal loans.
Be wary of deferments and forbearance. These are options available if you fall into some hard times but understand that interest occurs. If you’re in danger of defaulting, it’s best to contact your lender immediately to discuss options like interest-only payments. Avoid defaulting at all costs. Defaulting ruins your credit score, significantly increases the amount that you owe, and the government has the power to garnish your wages and seize your tax refund.
Pay off your most expensive loans first. Private loans typically have higher interest rates than federal loans. Similar to handling credit card debt with the debt avalanche method, if you have the means to pay ahead of schedule, consider starting off with the one that has the highest interest rate.
Determine if consolidation is right for you. If combining multiple loans into one single monthly payment with a fixed interest rate sounds like music to your ears, then a consolidation loan might be right for you. Much like consolidating your debt, this method works well for many people. Be sure to shop around carefully when it comes to consolidating your private loans and compare for the best option. To consolidate your federal loans, there is a great direct loan program and calculator to help you with the process.
Look into loan forgiveness programs. Certain fields and employers have put various programs in place to help with student loans. Careers involving medical, teaching, non-profits, and the public sector have been known to have wonderful loan forgiveness programs after committing to working in that area for a number of years. For more information to see which fields qualify, IBR Info is a great resource.
Graduating college is an impressive milestone and will lead you to great opportunities. Figuring out how you’re going to handle your student loan debt is a big part of taking that next step. Remember, the worst thing you can do is ignore the inevitable. The more you prepare, the better.
For more information about managing your finances, call 800-769-3571 to speak to a credit counselor today.