In just a few weeks, it will all be over. You’ll turn in your last exam and sigh with relief. Then you’ll don your cap and gown, accept your diploma, and pose for photos. Finally, you’ll be off to the real world – to start your job search or, if you’re lucky, your first post-college position.
But one aspect of your education is just beginning: your student loan repayment. This may sound intimidating, especially if the financial vocabulary is new to you. However, with a little research, you’ll find your debt far less daunting. Here are some key points to remember as you prepare to tackle your loans,
1.) Know your loan servicer. Although you’ve borrowed money from the federal government, you’ll your federal loans through a loan servicer, which the federal government will assign you. Common loan servicers include Navient, VSAC, Nelnet, and Granite State. If you took out a private loan, from a bank, for example, you will repay the money you borrowed, plus interest, to that lender.
2.) Understand grace periods. Most federal loans, except for PLUS loans, have a six-month grace period. That means you do not have to start paying your loans until six months after graduation. Use this time to educate yourself about your loan repayment options if you haven’t done so already. And don’t get too complacent: you’ll have to start making payments shortly, so you don’t want to get used to spending a lot of your income.
3.) Know your options. There are lots of ways to repay your student loans. You can pay the same amount every month for up to ten years (Standard Loan Repayment), or you can make payments that increase over time (Graduated Repayment). Some plans take into account your income (Income-Based, Income-Contingent, or Income-Sensitive Repayment.) Other options exist as well. Although you will pay the least interest – and thus the least amount of money – under the Standard Repayment plan, other schemes may be better suited to your financial situation. This is particularly true if you find yourself working less hours or earning less money than you anticipated. Visit https://studentaid.ed.gov/sa/repay-loans/understand/plans for an overview of your repayment options.
4.) Beg forgiveness – or at least a reprieve. If you return to school, are active-duty military, find yourself unemployed, or experience economic hardship, including Peace Corps service, you may be able to defer your loans. That means you won’t have to make payments for a period of time. Depending on what type of loan you have, the government may even pay your interest during your deferment. If you find yourself unable to make payments, ask your loan servicer for information about your options. In addition, the federal government offers loan forgiveness programs for some teachers and public servants. If you qualify, you may not have to pay back some of your loans. Visit https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation for more information.
5.) Do the math. Know how much you borrowed and how much you can expect to pay, over time, under the various repayment plans. Fortunately, the federal government offers a website that will do the calculations for you. You’ll need your FSA id to log in.
It’s natural to be apprehensive about your student loans. After all, you borrowed a lot of money to get where you are today, and you may already be anxious about starting your career. However, by educating yourself about student loans and your debt, you can prevent most problems and ensure a much brighter financial future.
-Dorothy A. Dahm