You may have just graduated college, or maybe it has been a few years. Either way, it’s important to understand your student debt and create a repayment plan that is realistic for your specific needs.
1. Understanding Your Debt
Whether you have student loans, credit card debt, or personal loans, it’s essential to keep track of the lender, the balance, and the repayment status for each loan. Contact private lenders directly to find out what you owe. If you have any federal loans, you can visit the National Student Loan Data System
. You can also order a free copy of your credit report to see who your lenders are.
2. Choosing a Repayment Plan
If you have various lenders, it may make the most sense for you to consolidate all of your loans into one low interest loan
. Organizing your debt into one loan may help reduce missed or late payments. If you choose not to consolidate, you’ll find that you still may have options with different lenders. You may be able to choose an Income-Based Repayment or Pay-As-You-Earn plan. These plans are based on your current income and make your monthly payment more manageable.
3. Deferment and Forbearance
If you find yourself having trouble making payments due to unemployment, health issues, or other financial challenges, you may be able to temporarily postpone your federal loan payments. During a deferment, you do not need to make payments and the federal government may even pay the interest on your loan during the period of deferment. If you don’t qualify for deferment, your loan officer might be able to grant you forbearance. This means you may be able to stop making payments or reduce your monthly payment for up to 12 months. Interest will still accrue during this time.*
Budgeting is key to any debt repayment plan. Once you have figured out your payments, create a monthly budget and adhere to it. If possible prepay on your loan(s) when you can. If you can pay more than your minimum monthly payment every once in a while, this will lower the amount of interest you pay over the life of the loan. It’s also wise to pay off the most expensive loans first. Start with the loan that has the highest interest rate.
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Categories: budgeting, college, loans