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Top Secrets Graduates Need to Know About Repaying Student Loans

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While recent college grads are putting away their caps and gowns and starting on their job search, one thing looming in their minds is student loans. Most graduates will start making payments on those loans very soon. To assist you with that process, here are some strategies for smart repayment:

• Get to know your loan servicer(s): Most repayments are handled by a loan servicer. If you have several loans you may have several loan servicers, each of which may have its own procedures for payment. You are responsible for making prompt payments to each servicer, even if you do not receive a bill.

• Choose a repayment plan for federal student loans: Federal student loans have different repayment options such as the standard repayment plan, where you repay your loan in up to ten years, or an extended plan, where you have up to 25 years. A graduated plan gradually increases payments. There are also several income-based options. You can choose whichever plan is right for your present income situation, but you have the right to change repayment plans at any time.

• Consolidation may help: If you do have loans from several servicers, it may be helpful to consolidate them into one and make only one payment per month. Federal student loans may be consolidated with other federal loans, and private student loans may also be consolidated.

• Let your servicer know about any special situations: You may be eligible for deferment or forbearance, which allows you to temporarily postpone or lower your loan payments. This could occur if you decide to go back to school, serve in the military, or experience financial hardship.

• Check if you’re eligible for loan forgiveness: With federal student loans only, there are a few circumstances where you may not have to repay some or all of your loan. This includes certain kinds of teaching or public service, total and permanent disability, or the closure of the school where you were studying.

Negative Consequences of Not Repaying Your Student Loans

You must repay your loans even if you did not complete your education or cannot find a job related to your major. If you go into default, it could affect your ability to borrow money for a car, to rent an apartment, or buy a home. You might be surprised to find that you could have trouble signing up for utilities, homeowner’s and auto insurance rates could be higher, or you might not be eligible for a cellphone plan. The federal government may garnish your pay check, or it could attach your federal income tax refund. If there is a co-signer on your student loan, that person may become responsible for your debt. It is very important that you contact your loan servicer immediately if you are unable to make payments on time.

If you need more information about repaying student loans, or want insights regarding the college financial aid process, contact College Financial Aid Advisors (CFAA).

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