One quarter to one third of recent college graduates who took out students loans to finance their college education are late paying their first student loan bill. 35% of people under 30 are 90 or more days delinquent. After 270 days of non-payment, you are considered in default on your loan. All of this can result in damage to credit scores that can affect graduates for life.
The reason is not usually irresponsibility but the inability of those who are indebted to understand the whole process of repaying their loans, a very complicated business. Students who have borrowed monies for their education should know three things:
• How many loans they have,
• How and when to repay those loans, and
• What to do when they can’t afford to either make the payments or make their payments in full.
Here are some tips for making sure you are repaying your student loan debts and still keeping your credit intact.
First, find out how many loans you have.
You may not know exactly how many loans you have because you may have been given different loans every year you went to school with each new financial aid package. Some monies are grant monies and some are loans; it is not always easy to tell one from the other. Also, many students have taken out private loans to make up for what they didn’t get in their financial aid packages.
To find out exactly what and where you owe, you can go to the National Students Loan Data Center to find out what federal monies you have borrowed, and you can get copies of your credit reports to find out what the private loans are you have out. You should also find out what server you have. Servers are agencies that collect the monies you owe the federal government. You may have more than one. The server(s) will explain what you owe monthly for each loan.
When you have found all this out, which you should do even before you graduate, you should make a spread sheet of all that you owe.
Know when to repay your loans.
There is a 6-month grace period after your graduation for making repayments on federal student loans. Private loans vary. There may be a grace period or you may have to start repayment immediately after you graduate. You should have a list of your user names and passwords for your loans. With these, check online to find out what your monthly payments are and what your due dates for those payments are. Make sure, also, that the servers and private loan companies and banks have your most recent email and snail mail addresses so you will be notified if you have anything that you have forgotten to pay or are late.
Also, you need to choose the right payment method for you.
It is a choice.
• You could have your payments automatically deducted from your checking account so you do not have to keep close track of where and what you owe and when.
• You should also know that although most loans are set for repayment over a 10-year period, you can extent your payment period for up to 30 years. This makes your monthly payments more manageable, but it will also increase your interest payment.
• There are also graduated payment plans. These plans allow you to pay less at the beginning when you are making less and more as your progress in your career.
• Loan consolidation is a good way to go as well. It allows you to make one payment for all your loans. You can visit the Student Loan Borrower Assistance Program of the National Consumer Law Center to find out about consolidations.
• A final option is available on the Department of Education website. This option is called the income-based repayment plan. You will be asked to pay what you can afford. In fact, some federal loans may be forgiven in part.
Obviously, student loan debt is both expensive and complicated. How you repay your loans, or don’t, can affect your financial health for the rest of your life. Before borrowing, you might use the NY TIMES’ Student Loan Calculator. This site will let you look at the average student loan debt for the colleges you are considering and estimate what salary you will have to earn after graduation to afford that debt