Know how to overcome your LOANS!

Whether you are in school, taking a break, or have already started repaying your loans, here are 10 important things for you to know:

1. Know your loans: Keep track of the Lender, Balance, and Repayment status for each of your student loans. Knowing these helps determine your options for loan repayment and forgiveness. Visit NSLDS  if you are unsure or ask your lender. On NSLDS you will be able to see the loan amount, lender(s), and repayment status for all of your federal loans. If they aren’t listed then they are most likely private (non-federal) loans. Contact UW-L if you can’t locate any records!

2. Know your Grace Period: A Grace Period is the amount of time you can wait after leaving UW-L before you have to make your first payment. Stafford (federal) loans are 6 months, Perkins loans are 9 months! For federal PLUS loans, it depends on when they were issued (Click here). Private loans have different grace periods so consult your paperwork or contact your lend to find out. DO NOT MISS YOUR FIRST PAYMENT!

3. Stay in Touch with your Lender: Just like anything else, if you change your number or e-mail, make sure you tell your lender right away. It could cost you a bunch if they have to get a hold of you and can’t. Open all e-mails and mail that you receive from them. If you’re getting unwanted calls from your lender or a collection agency, call your lender! Lenders are supposed to work with borrowers to resolve problems. Work with your lender and NEVER ignore bills, they can cause long-term consequences.

4. Pick the Right Repayment Plan: when your federal loans come due, your loan payments will automatically be based on a standard 10-year repayment plan. If the standard payment is going to be hard for you to cover, there are other options, and you can change plans down the line if you want or need to. Extending your repayment period beyond 10 years can lower your monthly payments, but you’ll end up paying more interest – a significant amount-over the life of your loan. Some important options for student loan borrowers are income-driven repayment plans such as Income-Based Repayment and Pay As You Earn which cap your monthly payments at a reasonable percentage of your income each year, and forgive any debt remaining after no more than 25 years (depending on the plan) of affordable payments. . To find out more about Income-Based Repayment and related programs and how they might work for you, visit IBRinfo.org.

5. Don’t Panic; Just Breathe: If you are having problems making payments because of unemployment, health problems, or other unexpected financial challenge, remember that you have options for managing your federal  student loans. There are legitimate ways to temporarily postpone your federal loan payments, such as deferments and forbearance. For example, an unemployment deferment might be the right choice for you if you’re having trouble finding work right now. But beware: interest accrues on all types of loans during forbearances, and on some types of loans during deferment, increasing your total debt, so ask your lender about making interest-only payments if you can afford it.

6. Stay Away From Trouble: Do not ignore your student loans. There are huge consequences that can last a lifetime. Not paying can lead to delinquency and default. For federal loans, default kicks in after nine months of non-payment. When you default, your total loan balance becomes due, your credit score is ruined, the total amount you owe increases dramatically, and the government can garnish your wages and seize your tax refunds if you default on a federal loan. For private loans, default can happen much more quickly and can put anyone who co-signed for your loan at risk as well. Talk to your lender right away if you’re in danger of default. You can also find helpful information www.studentloanborrowerassistance.org.

7. Lower Your Principal If You Can: When you make a federal student loan payment it covers any late fees first, then interest, and finally the principal. If you can afford to pay more than your required monthly payment – every time or now and then – you can lower your principal, which reduces the amount of interest you have to pay over the life of the loan. Include a written request to your lender to make sure that the extra amount is applied to your principal! Otherwise it will automatically be applied to future payments instead. Keep copies for your records and check back to be sure the over payment was applied correctly.

8. Pay Off the Most Expensive Loans First: If you’re considering paying off one or more of your loans ahead of schedule, or trying to reduce the principal, start with the one that has the highest interest rate. If you have private loans in addition to federal loans, start with your private loans, since they almost always have higher interest rates and lack the flexible repayment options and other protections of federal loans.

9.  To Consolidate or Not to Consolidate: A consolidation loan combines multiple loans into one for a single monthly payment and one fixed interest rate. If this is appealing, here are some pros and cons to consider. You can consolidate your federal student loans through the Direct Loan program, and this calculator can help you figure out what your interest rate would be. For private consolidation loans, shop around carefully for a low or fixed interest rate if you can find one, and read all the fine print. Never consolidate federal loans into a private student loan, or you’ll lose all the repayment options and borrower benefits – like unemployment deferments and loan forgiveness programs – that come with federal loans!

10. Loan Forgiveness: There are various programs that will forgive all or some of your federal student loans if you work in certain fields or for certain types of employers. Public Service Loan Forgiveness is a federal program that forgives any student debt remaining after 10 years of qualifying payments for people in government, nonprofit, and other public service jobs. Find out more at IBRinfo.org. There are other federal loan forgiveness options available for teachers, nurses, AmeriCorps and PeaceCorps volunteers, and other professions, as well as some state, school, and private programs (see some examples).

Keep these tips in mind to help you avoid debt down the road… 

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