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Plan Well, Retire Well

Saving and investing your money

Student Loan Repayment: What Students Need to Know

This week, we're pleased to welcome Sharon Cabeen as a guest blogger to Plan Well, Retire Well. Sharon will be writing a series of posts on a financial issue that we have not addressed here before: student loans. Sharon is director of financial literacy program operations with TG. You can reach Sharon at (800) 252-9743, ext. 6781, or by email at Additional information about TG can be found online at

College is an exciting time. It's a time for new friends and new experiences, for learning and for expanding one's horizons. Given this excitement, most new college students give little thought to what lies on the other end – entering the adult world, looking for a job, and, perhaps most crucially with today's high college costs, repaying student loans.

While no one wants to dampen the enthusiasm that comes with going to college, the unfortunate reality is that too many students leave college without a clear understanding of their responsibility to repay their federal student loans, or even of how they should go about doing so. Over the next couple of months, TG will be presenting a series of posts to help the readers of this blog – as well as the student loan borrowers they may communicate with – understand the repayment plans federal student loan borrowers can choose from, the options available should borrowers have difficulty with repayment, and the consequences of failing to repay student loans in a timely manner.

So what do students need to know as they sign on the dotted line – or, increasingly, as they press a button on their computer screens – for the student loans they need in order to pursue a higher education? For one thing, they should know that, for all the negative press associated with student loans in recent years, what often isn't emphasized are the positive effects of repaying student loans on time. These include retaining borrower benefits such as reduced interest rates, options for deferment and forbearance, and an improved credit rating.

Another thing recent graduates should be aware of is the possibility of having to make payments to more than one loan holder, involving multiple due dates and loan payment amounts. This circumstance can be confusing and cumbersome to manage, presenting a challenge to successful loan repayment.

Borrowers should also know that, as daunting as repaying their student loans may seem, they can choose from a variety of repayment plans to suit their income and their needs. Some of these plans can reduce the strain of high monthly payments for those with particularly substantial student debt. For those struggling to make payments at all, deferment and forbearance offer the possibility of postponing loan repayment until better financial circumstances arise.

Finally, students taking out loans should know that neglecting to make their student loan payments can lead to unpleasant consequences. These can include a damaged credit rating, increased financial burden from collection fees, and the possibility of garnished wages.

Clearly, new college students should enjoy the excitement and possibilities going to college offers. If borrowing for that education makes it possible, students should have no reservation about doing so. But they should also be aware of the obligation to repay their student loans, the repayment options available, and the benefits of managing loan repayment responsibly.

Look for a future post on the variety of repayment plans students can choose from, coming soon.

Sharon Cabeen

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