Student Loan Debt Management
Many students attending a college or university in the United States will graduate with a significant amount of student loan debt. It is important to forecast your expected student loan payments while you are still enrolled in school. This will allow you to properly budget and limit over borrowing while enrolled.
Know Before You Owe
Before you borrow your entire loan package, you should identify exactly what your educational cost will be. It is also helpful to estimate your payments before you borrow.
The Federal Student Aid repayment calculator can help you estimate what your repayment options will be once you graduate.
For example, suppose you are starting your graduate education and already have amassed undergraduate student loans with a $250 monthly repayment. You have been offered a $20,500 unsubsidized Stafford loan and want to look into the standard repayment option. Using the repayment calculator, you estimate that your monthly repayment on the $20,500 loan will be $235.91. This amount combined with your undergraduate repayment of $250 totals $485.91. Now, consider the following questions:
- Is this an amount you can realistically repay on a monthly schedule without missing any payments?
- Is this amount more than eight percent of your current income?
- How much do your classes really cost?
These are important factors to consider when deciding the amount you need to borrow. If you suspect you might miss payments or the amount borrowed exceeds eight percent of your income, you may want to reconsider borrowing the entire amount offered to you.
You can see all the Federal Loans you have borrowed to date by visiting the National Student Loan Data System. To view private loans, please contact your private loan lender.
Repayment and Beyond
Failure to make your monthly loan payment can adversely affect your credit history and, in turn, prevent you from borrowing for other reasons in the future. One of your greatest responsibilities as a student loan borrower is making sure you do not go into default. If for any reason you fear you will not be able to make your monthly payment, it is imperative to contact your lender either by phone or through your online account to identify your options. Many lenders will work with you to lower payments temporarily or provide guidance for changing your repayment structure.
Many individuals in repayment find it easiest to set up an automated payment from their checking accounts so they have the security of an automatic withdrawal. With advances in online payment and clarity of information on lender/servicer pages, you will easily be able to identify this option with your student loan lender or servicer.
Many student loans (especially Direct Federal Loans) will offer a six-month grace period after you graduate or are no longer attending school at least half-time. During this period, you should take the time to research your repayment options with your lender so you are prepared for repayment once the grace period ends. It is important to remember that you can only receive one grace period per loan. Once your grace period expires, you may be able to put that loan in deferment or forbearance while you're enrolled, but immediate payment would be needed once you drop below half-time status again.