The rising cost of college education has become an issue for both post-secondary school students and parents. This is reaching a point where many people come to a conclusion that taking out student loans offered by the government is no more a choice but a necessity. It may seem an alarming debt incurred to tell on the borrowers later, considering the cost of funding post-secondary school education.
However, thoughtful planning and in-depth knowledge about the best way to manage your student loan debts can make the loan repayment life worthwhile for you. Paying off your student loan can be a lasting and challenging thing, especially when you are just leaving the college and entering the workforce at fresh. It can mount severe pressure on the finances of the borrowers, influences some significant life decisions, and cause a financial health risk.
The nation’s borrowers that are in default have been estimated at 7 million. With this alarming figure, it is essential for borrowers to seek for the best way to manage their student loan debts. If you are looking for guidance to manage your student loan debt, Student Loan Wizard is a place to go for info about how to manage your student loan debt. The platform is equipped with student loan management experts that guide you through different student loan issues you may face. Read on as we reveal all you need to know about your student loan debt.
Best Ways to Manage your Student Loans
The best approach to student loan management is to first, study and understand your loan package before entering into an agreement with any loan offer. Considering the rising student loan debts of one trillion dollars in the United States today, there is a need for undergraduates who are thinking of taking student loans or graduates with student loan debt to seek out for help in managing their loan debt prudently. Here are the expert insights to assist you on how you can manage your student loan debt:
- Understand your loans
The in-depth knowledge about student loans plays a vital role in managing your student loan efficiently. Firstly, look into federal student loans, as they have federal government back-up; hence, you tend to enjoy some benefits such as low-interest rates, flexible repayment options, easy eligibility criteria, and much more. Private loans on their own are expensive and risky compared to federal loans.
To apply for federal student loans and participate in any federal student aid program, college students should fill out and submit Free Application for Federal Student Aid.
However, it is essential to understand the significant differences among each of the federal student loan before signing the loan agreement. Enter your Federal Student Aid PIN on National Student Loan Data System to check out the complete list of entire federal student loans. Anyone not found on the list may be private student loans.
- Choose the right repayment plan
This is one of the vital factors of effective management of student loan. You are expected to start paying off your student loan at the end of your “grace period”, which is after your graduation when you enter the workforce. Choosing a plan to pay off your student loan can be challenging, so it is advisable to understand different repayment plans before choosing your repayment options.
You can visit this site to make use of the repayment calculator for different repayment option. However, the federal government usually set standard repayment plan as default repayment option if you don’t choose other plans. Hence, you are free to choose from the repayment plans available to you as listed below:
- Income-Based Repayment (IBR) Plan
- Graduated Repayment Plan
- Pay As You Earn Repayment (PAYE) Plan
- Income-Contingent Repayment (ICR) Plan
- Income-Contingent Repayment (ICR) Plan
- Income-Sensitive Repayment (ISR)
- Revised Pay As You Earn Repayment (REPAYE) Plan
- Always contact your Loan Servicer
Loan servicers usually send information and updates that are important to your student loan settlement plans. Details such as payment commencement and choice of repayment plan are sent to the borrowers for further necessary actions. Hence, it is essential to stay in touch with your loan servicer, so you don’t miss these important updates. One of the consequences of this is that you may be late on your payment or be enrolled in a repayment option that is expensive as against your wish. Always contact your loan servicer to know if there is an update on your student loan, or if you hear about any new repayment package you may benefit from.
- Consolidated or not consolidated. Which one?
Have you heard about consolidation loan? When you combine multiple loans into a single loan with one interest rate depending on the weighted average of the combined loans’ interest rates, it is called a consolidation loan. Though consolidation is not compulsory for student loan borrowers, there are some benefits such as added option of repayment plans and loan forgiveness attached to loan consolidation.
Some federal student loans may not be eligible for some repayment plans, but if those loans are consolidated into another, they can qualify for such repayment options. However, you need to research and fully understand pros and cons of consolidation prior taking the step to see if consolidation is right for you. It is worthy of note that it is not advisable to consolidate federal loans into a private loans, as you tend to forfeit some benefits such as loan forgiveness and unemployment deferments and as well as your repayment plan.
- Loan Forgiveness
Loan forgiveness is another student loan term you should understand. This Public Service Loan Forgiveness is a government scheme that forgives outstanding student debt after ten-year repayment plan if the borrower is having his or her career in the public service, nonprofit organization, and other related public organization.
There are also other forgiveness programs those borrowers in some specific field such as military service, teaching, medicine, and much more can enjoy.
Deferment can be described as a term that allows borrowers to stop monthly payments on their student loans temporarily. Borrowers can enjoy this while:
- you are unemployed,
- earning less than required 150% of poverty line of your state,
- serving in the military,
- you are eligible for Perkins loan cancelation, or
- you are in the Peace Corps
However, you need to formalize your deferment by completing the required documents as required by your loan servicer. You need to enroll in a qualified career school or college to be eligible for deferment. A notice must be sent to you by your loan servicer that your loan has been placed on deferment. Based on your loan type, you may or may not incur interest on your loan during a deferment. In the case of forbearance, you are also allowed to stop monthly payment for some month but the accrued interest on your loan during forbearance is paid accordingly irrespective of your loan type.