Stay ahead of this big expense
Recent college graduates already have enough on their plates worrying about getting a job and supporting themselves — the last thing they want to do is stress over student loan repayment. For most, paying off student loans takes a long time, so no matter where you are in that process, there are three things you should stop and do right now.
1. Get organized
Take an inventory of your student loans. You can get a list by signing up at http://www.nslds.ed.gov/. After a short enrollment process, you will have a handy list of all guaranteed loans that were issued to you by the government, as well as those made by private lenders through June 2010. If you have a private non–guaranteed loan, those should all be present and detailed on your credit report, which you can find for free online.
Create a spreadsheet chronicling the name of each lender, the web address, your username and password (ensure your device is locked or encrypted), the loan balance, and the interest rate. The latter will be helpful if you opt to consolidate or pay off any interest early down the road. But be sure to keep your list up to date, as interest rates on student loans can be fixed or variable.
2. Know your repayment options
“The standard repayment schedule extends your loan payments over ten years, or 120 payments,” explained Maggie McGrath of Forbes. “However, if the standard monthly payments aren’t manageable on your budget — or if you’re unemployed or otherwise unable to repay your loans — the federal government has some alternative repayment plans for you, as well as some deferral options.”
Income-based repayment (IBR) and income-contingent repayment (ICR) extend your payment period to 25 years, capping your monthly payments at a fixed percentage of your income. The income on which payments are based and the actual percentage differ between the two plans. Pay-as-you-earn is a 20-year repayment period, with yet another varying percentage of your discretionary income.
You can read about other repayment options from the government here: https://studentaid.ed.gov/sa/repay-loans/understand/plans. Be wary, as these types of programs can cause your interest costs to increase over time, so always pay as close to your original amount due as you can.
3. Be aware of loan forgiveness opportunities
There are three primary programs that forgive the balance of your loan: Public service loan forgiveness, teacher loan forgiveness and Perkins loan cancellation.
“To qualify for forgiveness, your loans can’t be in default, meaning they’ve gone unpaid for more than nine months,” noted higher education expert Brianna McGurran of Nerdwallet. “Also, private student loans don’t offer forgiveness, though some lenders will let you make interest-only payments or take a temporary interest rate reduction if you’re having trouble affording your bill.”
Public service loan forgiveness requires you to have been working for a nonprofit or the government for at least 10 years in roles including, but not limited to, firefighting, teaching, the military and nursing. In the teacher-specific program, you must work full time as an educator for five consecutive years. The Perkins loan forgiveness also cancels the balance of that loan if you’ve worked as a teacher, firefighter, nurse, police officer, school librarian or public defender for about five years or more. For a complete description of eligibility requirements, visit https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation.
If you take the time to do your homework and gather yourself before — or even while — you are repaying your student loans, the process will seem a lot less scary, and a lot more manageable.Used with Permission. Published by IMN Bank Adviser Includes copyrighted material of IMakeNews, Inc. and its suppliers.