Nothing says, “Welcome to adulthood” quite like getting your first student loan bill in the mail. Though this can be a stressful start to the process, there are many ways to manage your student loans. One important resource to get to know is StudentAid.gov. The site offers many tips and resources for managing your college loans.
Four in ten adults under 30 in the U.S. have student loan debt. It’s important to know if your loans are public (from the U.S government) or from a private institution. USAGov can provide you with the information and resources needed to manage a loan or resolve disputes, but having a plan is key. Here are six great tips from StudentAid.gov that can help you start the process of paying off your student loans:
1. Choose an affordable payment amount
There is no one-size-fits-all approach to paying back student loans. Do you want to get rid of your loans quickly or pay the lowest amount possible per month?
The Standard Repayment Plan, the plan you’ll be entered in if you don’t take any action, will set you up for a loan plan that will need to be paid off in ten years. If you can’t afford that amount and need lower payments, apply for an income-driven repayment plan. Monthly payments will likely be lower than they would on the standard plan. In fact they could be as low as $0 per month, but you’ll likely be paying more and for a longer period of time.
Compare the different repayment options based on your loan, family size, and income using this repayment calculator.
2. Explore forgiveness options
There are legitimate ways to have your loans forgiven, but you must meet specific requirements to qualify. Research forgiveness programs as soon as possible, as it may affect your repayment strategy. If you work as a public servant and are interested in Public Service Loan Forgiveness, you should fill out an Employment Certification Form to find out if you qualify.
3. Sign up for automatic payments
Signing up for automatic debit payment through your loan servicer will make it much easier to pay back your student loans. Your payment will be automatically taken from your bank account each month. As an added bonus, you will get a 0.25% interest rate deduction when you enroll!
4. Make extra payments whenever you can and specify how you want them applied
Pay early. Pay often. Pay extra. Tell your servicer the following two things if you want to ensure that your loan is paid off faster:
Tell them that the extra amount you pay is intended to be put toward the actual loan total and not future monthly payments.
Tell them to apply the additional payments to your loan with the highest interest rate. By doing this, you can reduce the amount of interest you pay and reduce the total cost of your loan over time. Learn more about how to make extra payments.
5. Don’t postpone payments unless you really need to
One of the flexible repayment options offered is the ability to temporarily stop your payments. This suspension called deferment or forbearance can be helpful if you’re experiencing a temporary hardship. However, these are not good long-term solutions.
In most cases, interest will continue to accumulate on your loan while you’re not making payments and may cause interest to accumulate on interest, a process called capitalizing. When you resume repayment, your loan balance will likely be higher than it was before.
Before choosing deferment or forbearance, ask about enrolling in an income-driven repayment plan. Under those plans, if you make little or nothing, you pay little or nothing. Additionally, you’ll be working toward loan forgiveness while making a lower payment. Consider these other available options before postponing your payments
6. Take advantage of FREE federal student loan assistance
Each federal student loan borrower is assigned to a loan servicer (some borrowers may have more than one servicer, depending on the types of loans you have). Your loan servicer is a company that collects your student loan payments and provides customer service on behalf of the U.S. Department of Education. This is a FREE service. There are many companies out there who offer to help you with your student loans for a fee. Do not trust these companies. Remember: You don’t have to pay for help with your loans. If you need advice, assistance, or help applying for a repayment program, contact your loan servicer.
Student loans are not fun to pay back, but ignoring them can have serious consequences and won’t make them go away. If you’re worried about your student loans or don’t think you can make payments, contact FAFSA for help. No matter what your financial situation is, they can help you find an affordable repayment option.