With October just around the corner, many recent college graduates will soon start receiving payment due notices for their college student loans. Some may be surprised by how complicated this process can get. The best approach is to take some time now to research your options before getting caught up in the payment frenzy. You need to determine how many student loans you have and who your lenders are, since you may have taken out a combination of federal and private student loans over the years. For federal student loans, you can review your loan information by logging in to My Federal Student Aid.
Once you have gathered information about your loans, it is time to think about your repayment strategy. The following are some federal student loan repayment options. You can also use these guidelines to research your private student loans:
• Direct Consolidation Loan: You can make it easier on yourself by combining all of your federal student loans into one. This means you will only have to make one payment each month. There are some considerations if you take this approach, so leave yourself enough time to make the right choice.
• Review Repayment Plans: There are many types of repayment plans available for federal student loans, including standard repayment, graduated repayment, extended repayment and several variations on income-based repayment plans. You can use the FSA Repayment Estimator to explore the various options based on your individual estimated income.
• Postpone Repayment: Depending on your situation, you may be eligible for a deferment or forbearance, which would allow you to postpone making payments. These are available in situations such as continued schooling, illness, financial hardship, military service, and certain types of public service. It can take some time to verify your eligibility for these programs, so it is best to begin early. If you do not get the paperwork completed and approved, you must begin making payments so your loans do not go into default.
• Forgiveness, Cancellation and Discharge: Most students are required to repay their student loans even if they don’t find a job in their field of study; however, there are specific situations where you may no longer have to repay some or all of your federal student loans. These situations might include a closed school, certain bankruptcies, permanent disabilities, and death. Students enrolled in specific teacher, medical, military or public service programs might be eligible to have a portion of their loans forgiven after a given period of repayment. Once again, you must continue making payments until your application is approved.
Your parents may also owe money on federal PLUS loans. Make sure you talk to them to verify that they will make those payments and don’t expect you to reimburse them. This might seem like a lot, especially if you are still trying to find a job and get your life started, but it is worth taking the time now to do your research and get a plan in place.