Do Your Research for Student Loan Repayment
This article was originally published on July 18, 2017 and expired on August 30, 2017. It is provided here for archival purposes and may contain dated information.
After college graduation, what’s next? For about 7 out of 10 college graduates, one of the next steps is repaying their student loans. Repaying loans is definitely not as much fun as graduation parties but is part of post-college life. It’s easy to want to put it off until “tomorrow,” but delaying taking action is not a good strategy.
The first step towards repayment is to collect information about all of your student loans. For example, how much do you owe and what is the APR (annual percentage rate) for each of the loans? If you borrowed federal student loans, login to the National Student Loan Data System at www.nslds.ed.gov/.
However, if you borrowed private student loans, then that information is not in this database. The best way to determine who is currently servicing your loans and the balances is to look at your credit reports. You can check all three of your credit reports, at no cost, at www.annualcreditreport.com. Double-check this information with the information you may have kept when you borrowed the money. Keep in mind, though, that the lender may have sold your loan to a different financial institution – that’s why looking at your credit reports is helpful.
Once you know your total debt amount, then you’re ready to explore repayment options. I really like the Consumer Federal Protection Bureau’s website tool (www.consumerfinance.gov/paying-for-college/repay-student-debt) to give an overview of your options. The good news is that you likely have several options; the bad news is that one size doesn’t fit all and you’ll need to do a little bit of research to find the best match for you.
When comparing repayment options, consider the monthly payments you can afford now while keeping in mind that the longer it takes you to repay the loan, the more money you likely will pay overall. An easy-to-use calculator that allows you to explore the effect of changing the repayment period is at http://www.finaid.org/calculators/loanpayments.phtml.
Also, for federal student loans you can change repayment plans at any time for free. For example, if you receive a salary increase, then you may want to increase the amount you’re paying. The Federal Student Aid website has more information about repaying federal student loans at https://studentaid.ed.gov/sa/repay-loans/understand/plans.
Often people are interested in consolidating student loans. If you have many different loans with a variety of payment due dates, then this may be helpful. However, be very cautious about consolidating federal student loans with private student loans. You likely have more options (including in the future if
your situation changes) with federal student loans and you may lose these if you consolidate them with a private student loan. The eXtension website (http://articles.extension.org/pages/72895/student-loans) has several excellent fact sheets including Federal Student Loan Consolidation and Forgiveness. Don’t automatically consolidate your loans; do your research first.
After researching your options, if you have questions call your lender. If you don’t feel like you’re getting the answers you need, consider filing a complaint with the Consumer Financial Protection Bureau at http://www.consumerfinance.gov/complaint/#student-loan. It’s through this complaint process that the CFPB can investigate bad lending practices. Unfortunately, too many borrowers have had problems getting good quality answers.
In addition, the CFPB may be able to help you negotiate with your lender. You also can download a sample letter from the CFPB website that clearly states the type of information you need from your lender in order to understand your repayment options, http://goo.gl/oW3LZ2.
One other very important point. Even if you can’t repay your loan now, don’t delay in dealing with your student loans. You may qualify for deferment or forbearance, which allows you to stop making payments or reduce your monthly payment amount for a specified period. This only happens if you take action and apply for it. This is a much better step than ignoring the problem.
Once you have a repayment plan set-up, consider making it an automatic payment so that your loan payments will be on time. This is a great way to build a positive credit history!
For more about student loans, read The Student Loan Chronicles on the Plan Well, Retire Well blog, www.RetireWell.illinois.edu.
Source: Kathy Sweedler, Extension Educator, Consumer Economics, firstname.lastname@example.org
Pull date: August 30, 2017