Student loans made it possible for you to go to college, but now that you’ve graduated—or maybe you’re taking some time off—those loans are coming due. Hopefully you’re in a position to be able to make your payments, but even if you’re not, you do have options. Here are my tips on how to keep your student loans under control.
1. Know what loans you have
It can be hard to keep track of your student loans, especially if you’ve taken out quite a few. But you’ve got to know who your lenders are, what the balances of those loans are, and their repayment status. If you’re not sure of any of these things, ask your lender or visit the National Student Loan Data System (NSLDS). You can log into NSLDS and see the status of all your federal loans. If some of your loans aren’t listed, they’re most likely private loans; for those, you’ll need to find recent statements or your original paperwork.
2. Stay in contact with your lenders
You need to keep your contact information current with your lenders. Update your information whenever you change your address, phone number, or email address. If you don’t, you could end up being in deep financial trouble. Open and read every communication you get about your student loans. If you’re getting unwanted collection calls, talk to your lenders—they’re supposed to work with you to solve problems, and even collection agencies have to follow a set of rules about how and when they call you.
3. You have repayment options
When your federal student loans come due, your repayment schedule will automatically be set to a 10-year period. You can, however, change that if you need to. Extending your repayment period will lower your payments, but it will also increase the amount of interest you have to pay. Also be aware that you may qualify for income-based repayment (IBR) options, which cap your payments at a reasonable percentage of your income and forgive any remaining debt after no more than 25 years of affordable payments. (Private loans are not eligible for IBR, deferments, forbearances, or forgiveness programs.)
4. Don’t default!
Not paying your student loans can lead to default, and default has consequences that can harm you for many years to come. Defaulting can ruin your credit, making it impossible for you to borrow money to buy a home, car, or business, for example. Default also means the entire loan balance becomes due, and if you default on federal loans, the government can garnish (take a portion of) your wages and seize your income tax refunds. Federal loans go into default after nine months of non-payment, while private loans can go into default much more quickly. Defaulting on private loans will also cause financial harm to the person who co-signed for your loan, too. If you’re in danger of default, talk to your lender and work out a payment arrangement.
5. Pay off the highest-interest loans first
If you’re able to pay off any of your student loans ahead of schedule, start with the loan that’s the most expensive. If you have private loans, the interest rate on those is almost always higher than the rate on your federal loans, so start with those first.
6. Learn about forgiveness options
There are programs that will forgive some or all of your federal student loans, including the Public Service Loan Forgiveness program, a federal program that forgives any remaining student debt after 10 years of qualifying payments for people who work in nonprofit, government, or other public service jobs. Other forgiveness options are available for teachers, nurses, AmeriCorps and Peace Corps volunteers, and much more. Read about some examples here. Keep in mind that some of these loan forgiveness methods may be considered taxable income, so read the fine print before you sign up.
Do you have any other tips for people paying off their student loans? Please share them in the comments.