Tips on Using Student Loans

Many students who want to continue their education have to do so by taking out student loans.  Sometimes, students are able to get good jobs that make enough money to cover the costs, or they get scholarships and grants, but many times, even if they have a job and get scholarships, it doesn’t quite cover all the costs of college.  With the unprecedented growth in costs, college is very expensive.  These tips will help you keep your student loan debt under control, which means avoiding fees and extra interest costs, keeping your payments affordable, and protecting your credit rating.

First of all, it is very important to keep track of the lender, balance, and repayment status for each of your student loans. These details determine your options for loan repayment and forgiveness. If you’re not sure, ask your lender or  You can log in and see the loan amounts, lenders, and repayment status for all of your federal loans. If some of your loans aren’t listed, they’re probably private (non-federal) loans.  For those, try to find a recent billing statement and/or the original paperwork that you signed.  Contact your school if you can’t locate any records.  However you do it, just make sure you know your loans.

Knowing you loans also means that you know your grace periods.  A grace period is how long you can wait after leaving school before you have to make your first payment.  It’s six months for federal Stafford loans, but nine months for federal Perkins loans.  The grace periods for private student loans vary, so consult your paperwork or contact your lender to find out.  Don’t miss your first payment!

Whenever you move or change your phone number or email address, tell your lender right away. If your lender needs to contact you and your information isn’t current, it can end up costing you a bundle. Open and read every piece of mail – paper or electronic – that you receive about your student loans. If you’re getting unwanted calls from your lender or a collection agency, don’t stick your head in the sand!  Talk to your lender! Lenders are supposed to work with borrowers to resolve problems, and collection agencies have to follow certain rules.  Ignoring bills or serious problems can lead to default, which has severe, long-term consequences.

Pick the right repayment option for you. When your federal loans come due, your loan payment will automatically be based on a standard 10-year repayment plan.  If the standard payment is going to be hard for you to cover, there are other options, and you can 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 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 which cap your monthly payments at a reasonably 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 these payments for borrowers in the public and nonprofit sectors.

Private loans are not eligible for Income-Based Repayment or the other federal loan payment plans, deferments, forbearances, or forgiveness programs. However, the lender may offer some type of forbearance, typically for a fee, or you may be able to make interest-only payments for some period of time. Read your original private loan paperwork carefully and then talk to the lender about what repayment options you may have.

Don’t Panic. If you’re having trouble making payments because of unemployment, health problems, or other unexpected financial challenges, remember that you have options for managing your federal student loans.  There are legitimate ways to temporarily postpone your federal loan payments, such as deferments and forbearance. For example, an unemployment deferment might be the right choice for you if you’re having trouble finding work right now. But beware:  interest accrues on all types of loans during forbearances and on some types of loans during deferment, increasing your total debt, so ask your lender about making interest-only payments if you can afford it.

All of these tips do fall under one tip, which is knowing your loans.  If you know everything about your loan, you can make better judgments and decisions on how to progress on paying your loan off.


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