Repaying Student Loans – 5 Easy Tips

It is time to begin repaying your student loans if you finished your college degree in May of 2013. That sixth month grace period your financial aid advisor told you about? This is the end of it. So what happens now? What’s next for you?

Get Organized

Believe it or not, you received all the information you need to know about repaying student loans today during your college career. The question is, did you keep it all? If you did, congratulations! If you didn’t, you need to get to work. For your Federal Student Loans you can check the National Student Loan Data System. On this site you can use some information about yourself, enter your Federal Student Aid PIN and you will find the information you need. Did you take out private loans? If you don’t remember who your lender was you can check with your school’s financial aid office or check your credit report (get a free copy here).

Communication

Hopefully you have been in touch with your lender or loan servicer well before you had to worry about repaying student loans. But if you haven’t, pull together those student loan papers (see above) and contact your lenders. Speaking with your lender is the best thing to ensure successful repayment. If you are having trouble making payments don’t avoid the problem. It won’t go away. Reach out and discuss any issues you might be having. Your lender can help, even if you just need a couple months to get into a better position to repay.

Repaying Student Loans With Auto Debit

What’s the easiest way to make your student loan payment? It’s not writing yourself a note so you remember to make a payment each month. It’s setting up automatic payments. Many federal and private loans offer the opportunity to reduce your interest rate by .25% and sometimes even more. Interest is a powerful thing and every little bit you can reduce it will help.  As an added bonus,if you are set up for auto debit it is unlikely you will miss or be late for your payment.  If nothing else, set up a recurring payment from your account to your lender. You won’t get a discount but at least you won’t miss a payment.

Pay Extra When You Can

If you are just started repaying student loans you may be thinking “are you crazy? I can barely make my payment, much less pay more!” I know many graduates struggle with budgeting and making ends meet right after college. But maybe Grandpa sent you some money for your birthday or you got a tax refund. If you want to get out of student loan debt fast, send that money in with your next payment.

If you make the right choice to do that though, be very specific with your lender about what you want them to do with the extra cash. Some students have found that the extra payment is not being applied the way they want it to be. The Consumer Finance Protection Bureau offers some helpful tips in communicating your intentions to your loan servicer. When making extra payments aim to pay down your highest interest rate loans first, then to your highest balance loans.

Think Before You Choose Plans To Lower Your Payments

President Obama makes it a point to mention that students can choose Income Based Repayment (IBR) plans like Pay As You Earn (PAYE) to reduce the burden of their student loan payment. Sounds great, right? Paying less is always a good thing. Or is it? Your financial situation may be so dire that this is your last resort. But that is exactly what it should be, a last resort. Reduced payments sound great but what you must realize is that it will make your loan far more expensive over time. Your reduced payment under IBR plans may not even cover the interest accruing on your loan. And that interest that you aren’t paying gets added to principal. You will pay it eventually and it could cost you a lot.

Before you decide to participate in on of these plans, take a hard look at your situation. Can you make other changes in your lifestyle? Where can you cut expenses? Where can you pick up extra income. Here is the story of how one woman paid off $90,000 in student loan debt in three years! It is possible.

It is easy to find horror stories about repaying student loans in the media. But keep in mind, most graduates successfully repay their student loans. You can be one of them, just take control of it and don’t hide from it.

 

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I have over 20 years experience helping educate families and colleges about student loans. As debt levels have continued to rise, more media attention has been focused on the issue. But as an industry insider, it is clear to me that the information being provided is not wholly accurate nor is it always balanced. Student loan debt is not a simple issue and there are multiple players (lenders, students, families, schools and the federal government) involved in both the problem and the solution. My goal for the blog is to cut through the complexity of the student loan discussion by providing a balanced view from an industry insider.

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