If the results of the recent National Foundation for Credit Counseling online poll are any indicator, many college graduates will soon experience sleepless nights, since more than half of the poll’s respondents (53%) suggested that student loan debt repayment was causing them the most stress.
“The best way to feel more confident about keeping your student debt under control is to have a specific plan,” said Bruce McClary, spokesman for the NFCC, in a statement. “Part of the planning process involves learning about the debt and the options for making it work within a budget.”
To help graduates better control their financial future and stay on track repaying their educational loans, the NFCC offers the following tips:
- Track grace periods. – Different loans have different grace periods. A grace period is the length of time you can wait after leaving school before your first payment is due. The grace period is six months for federal Stafford loans, but nine months for federal Perkins loans. For federal PLUS loans, it depends on when they were issued. The grace periods for private student loans vary, so consult your paperwork or contact your lender to find out. Do not miss your first payment.
- Understand your loans. – Use the grace period to educate yourself about the types of loans you have, keeping track of the lender, balance, and repayment status for each one. Each detail can play a role in determining how each loan is repaid and what options may be available to you if you are ever at risk of falling behind. Start by visiting www.nslds.ed.gov to identify the details about the loan amounts, lender(s), and repayment status for all your federal loans. If some of your loans aren’t listed, they are probably private (non-federal) loans. For those, find a recent billing statement, the original paperwork, or both. The school may be able to help if those records aren’t handy.
- Plan for repayment. – When your federal loans come due, your loan payments will automatically be based on a standard 10-year repayment plan. But there are other options. You may be able to 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 in interest—often a lot more—over the life of the loan. Some important options for student loan borrowers are income-driven repayment plans such as Income-Based Repayment and Pay As You Earn, both of 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. Forgiveness may be available after just 10 years of payments for borrowers who work in the public and nonprofit sectors. To find out more about Income-Based Repayment and related programs and how they might work for you, visit www.IBRinfo.org, where you’ll find important information.
- Stay out of trouble. – Repaying your student loans is serious business. Ignoring them can result in delinquency and default, the effects of which can last a lifetime. Federal loans go into default after nine months of non-payment, triggering a set of nasty consequences: Your total loan balance comes due, your credit score is ruined, the total amount you owe increases dramatically, and, until the balance is paid, the government can garnishee your wages and seize your tax refunds. Private loans can default much more quickly, and can put at risk anyone who co-signed for your loan as well. Talk to your lender right away if you’re in danger of default.
For expert help from a certified financial counselor, borrowers can contact the NFCC at www.nfcc.org or 800-388-2227.
The National Foundation for Credit Counseling is the nation’s largest and longest serving national nonprofit financial counseling organization. For free, affordable, confidential advice through a reputable NFCC member, call (800) 388-2227, (en Español (800) 682-9832), or visit http://www.nfcc.org.