Current high school seniors are working to complete the FAFSA, and find out whether they qualify for financial aid from their prospective colleges. In four years, they hope to be able to achieve their dream of receiving a college diploma, without needing to rely too much on student loans in the interim. Recent college graduates, at the other end of the spectrum, have achieved their goal and are now assessing just how much their reliance on student loans during those years is going to affect their financial future.
New borrowers have the luxury of being able to learn from those who have traveled the student loan road ahead of them. They are learning to discuss financial responsibilities with their parents, and trying not to borrow an amount that will exceed their future estimated repayment capabilities. For those alums who are facing their first major test as a person responsible for repaying a loan, here are some steps to take when the student loan notices start arriving:
• Get a handle on it: If you didn’t keep track of your loans during the college years, now is definitely the time to get a handle on exactly how much you owe. Your college’s financial aid office might be able to help, or you can access the National Student Loan Data System (NSLDS), the U.S. Department of Education’s central database for student aid, using your FSA ID. For private student loans, you can communicate with the loan servicer.
• Add it up: Calculate a total amount you will be paying every month for all your loans, and compare it with the money you are earning minus your living expenses. If the amount due exceeds what you have available, then you have a problem.
• Know your options: There are some circumstances where you might be able to qualify for a deferment or forbearance, which will allow you to delay beginning your loan payments for a specified period of time. If this doesn’t apply to your situation, look into whether you qualify for an income-based repayment plan, or spread the payments out over a longer period of time than the standard ten years.
• Look at consolidating: It might be helpful to consolidate your federal student loans into one loan. This will probably increase the total amount you repay over time, and will not include private student loans, but it can make monthly payments much easier.
Above all, don’t ignore your student loans. Federal student loans, in particular, have a lot of options, but you have to be in contact with your loan servicer. Ignoring your loans only increases your costs.
You can learn more about repaying student loans in my book, Secrets of a Financial Aid Pro, which also contains information on completing the FAFSA, applying for financial aid, saving for college, and paying for college. Order it now and find out how to complete you student loan repayment journey.