Discover a Plan to Manage Student Loan Payments

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Before graduating in the next few weeks, this year’s college seniors should try to take some time to discover a plan to manage their student loan payments. Yes, things may be a bit crazy with final exams and all, but they are really not going to get any easier one your classes are through. You will have a million details to attend to then, and time will just appear to fly by. Suddenly six months will have passed, and you will be shocked when the payment notices start arriving and you have no plan in place.

Before you graduate, talk to the financial aid office or go online and find out the status of your federal student loans. How many do you have? When will they start coming due? What will the monthly payments be? You might be surprised at how much money you will be expected to pay every month, so the next step is to learn about your federal student loan payment options:

• Standard Payment Plan: You will make payments at a fixed amount for up to ten years, or 30 years for Consolidation Loans.

• Graduated Payment Plan: Payments start lower at first and then increase, usually every two years. Payment term is up to ten years or up to 30 years for Consolidation Loans.

• Extended Payment Plan: May be applied to fixed or graduated plans, with the repayment term extended to 25 years.

• Income-Driven Plans: Payments are set as a percentage of your income, usually with longer repayment terms.

• Consolidation Loans: Federal student loan consolidation centralizes all of your federal student loan payments so you submit one monthly payment to a single servicer. Private student loans are not eligible for a Federal Student Loan Consolidation.

There are positives and negatives to each approach, so don’t wait until the last minute to make a decision. Also remember that federal student loans may be only one part of your payment picture. If you took out private student loans as well you will have to perform a similar process with them.

If you borrowed from Discover Student Loans, for example, you might be eligible to reduce your interest rate by 0.25% during repayment by signing up for their Auto Debit payment plan. You can also determine if your circumstances are eligible for any of their deferment options. If you took out a variable interest rate loan with Discover prior to May 1, 2014, make sure you claim your 2% credit as a graduation reward.

Managing student loan payments is the last step in a long financial process. Parents should start imparting financial wisdom when their student is young, and build on that as the years proceed. My new book, Secrets of a Financial Aid Pro, provides insights into talking to your children about money at all different ages, and helps readers understand the different types of college financial aid that are available. Pre-order now and take advantage of some terrific bonus offers.

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