Get Ahead of Student Loan Payments
Congratulations — you survived college. But now it’s time to think about those pesky student loans.
Depending on its terms, a loan may allow graduates to delay their first payment for several months. This is when those recent borrowers should settle on a repayment plan, consider consolidation, make a budget and get through other repayment prep work.
Mark Your Calendar
The length of the grace period will vary depending on the loan. Most federal loans have a six-month reprieve, often ending around November. Perkins loans, which are also federal, have a nine-month pause. Private loan borrowers should check with their servicers on the existence and length of any grace period — they might not have one.
Take Stock of Your Loans
New graduates can take this time to verify how much — and which kinds — of debt they have. For federal student loans, head to the National Student Loan Data System, which is the government’s hub for that information.
Borrowers unsure of their private debt can check their credit report to see if any loans appear.
Calculate Interest
For many loans, interest will continue to accrue before the first bill comes due. Two exceptions are federal subsidized and Perkins loans, which have interest covered by Uncle Sam in school and during the grace period.
To complicate things, however, subsidized loans disbursed between July 1, 2012 and June 30, 2014 didn’t include this benefit.
Tamp Down Costs
Graduates better prepare to repay more than they borrowed. Why? Interest.
Get ahead of ballooning loan balances by making interest-only payments during the grace period.
Choose a Repayment Plan
Graduates have to make a tough decision: choosing a repayment plan.
A student loan repayment calculator can help borrowers figure out the relative costs of various plans. Remember that borrowers don’t need to pay anyone to enroll in a repayment plan — it should be free.
Consider Loan Forgiveness
Some repayment plans allow forgiveness after a certain number of payments, including Pay as You Earn, income-based repayment and Public Service Loan Forgiveness.
These typically require borrowers to demonstrate eligibility. PAYE and income-based repayment participants must have a relatively high debt-to-income ratio. Public Service Loan Forgiveness recipients must make 120 on-time payments while working with a qualifying organization.
Seek Relief
Federal borrowers struggling to make payments when their grace period ends can request forbearance or deferment.
Private borrowers can also reach out to their servicer for a rundown of options. But remember that interest may continue to accrue during this period of nonpayment, depending on the loan.
Weigh Consolidation
Consolidation, where various loans are combined under new terms, can make sense, depending on the borrower’s situation. Federal loan consolidation may help simplify repayment. But some loan benefits, such as Perkins loans’ unique forgiveness options, are lost in the process.
With private loans, consolidation can help a borrower score better repayment terms or swap lenders. But consolidating federal into private debt will cause a borrower to lose federal benefits.
Put Payments on Autopilot
Never miss a payment — and possibly earn an 0.25 percentage point interest reduction — by signing up with a servicer’s auto-debit.
Make the Call
Student loan borrowers don’t have to fly blind. Loan servicers, college financial aid offices and the federal government can all help recent graduates understand their options and get on a repayment plan. Just pick up the phone.
Don’t Slack Off After the Grace Period Ends
Once the grace period ends, the repayment fun begins.
Keep up-to-date on student loan repayment tips and advice while steering clear of common myths. And join the conversation by following U.S. News Education on Facebook, Twitter and Google+.
More from U.S. News
4 Steps for Prepaying Student Loans the Smart Way
How Student Loan Repayment Changes After Graduate School
Tipping the Scales on Income-Based Repayment Eligibility
How to Tackle Student Loans During the Grace Period originally appeared on usnews.com
