My Decision

Student loan debt has been a growing issue over the last decade. According to the Wall Street Journal, over 70% of college graduates hold some form of student loan debt, with the average being just over $35,000. Borrowers (students and parents) often feel trapped under their student loan debt and feel as if there is no possible way out. Understanding how to repay your student loans can save you a lot of time and money. There are many ways to save on student debt or even eliminate it altogether.

Debt management is learning to live on a budget day by day and develop a strategy to manage that debt (which includes student loans). Finding the right repayment plan for you, learning how to make payments, getting help if you can’t afford your payments, and seeing what circumstances might result in a loan being forgiven, canceled, or discharged are key to being successful in managing your student loan debt.

Default Prevention

Student Loan Default

Avoid default. Take the time to fully understand your loan agreement and the types of loans you are receiving. It’s also important that you not borrow more than you need or more than you expect to be able to repay. Develop a sound—and realistic—financial plan.

Don't do it. It's easy to fall behind on making payments on your student loan after you graduate, but remember that missing even one payment is a bad idea...so try to avoid it!

Don’t get labeled. If you forget to pay your bill by the due date, make sure you pay it immediately to avoid a default penalty (don't wait until your next bill). Most servicers give you 30 days before they report your delinquency to the credit bureaus. Once you get that "delinquency" label on your credit report you can NOT get it removed. The same goes for your parents who may have cosigned your loan.

Automate. Signing up for automatic payment deductions from your bank account will help you stay on top of your loan payments. Of course, you also need to make sure there is enough money in your account to cover the bill.

Know-it-all. To prevent a default, it's important to know where your loans are serviced and to know your rights and responsibilities as a borrower. Talk to your loan servicer or lender to make sure you have all the information you need.

The mail must go through. Make sure to let your loan servicer know that you have changed your address if you move. Not letting them know could result in missed mail, and ultimately end in a default on your student loan.

Ask for help. If you are having difficulties paying back your loan, call your loan servicer or lender to see if they can help. Income-based and graduated repayment options are available, or they might be able to extend your repayment period. Don't wait until you've defaulted.

More school, more time. If you are enrolled in school at least half-time, you are eligible to defer your federal direct student loan payments until after you graduate or drop below half-time status. You may also be able to defer some private student loans as well (check with your lender or servicer).

Life is hard. If you are facing certain hardships that make it difficult to pay back your loan, there are some deferment and forbearance options available. Talk to your loan servicer to discuss your options.

Loan Repayment

Work with your loan servicer to choose a student loan repayment plan that’s best for you.

To make your payments more affordable, repayment plans can give you more time to repay your loans or can be based on your income.

To find out more about repayment options before receiving a Direct Loan, borrowers may contact their school's financial aid office or the Federal Student Aid Information Center at 1-800-4-FED-AID (1-800-433-3243).

Loan Consolidation

Consolidating your federal education loans can simplify your payments, but it also can result in loss of some benefits. A Direct Consolidation Loan allows you to consolidate (combine) multiple federal education loans into one loan. The result is a single monthly payment instead of multiple payments. Learn about consolidation so you can weigh the pros and cons and decide whether a Direct Consolidation Loan is right for you.

Should I consolidate my loans?
What types of loans can be consolidated?
When can I consolidate my loans?
What are the requirements to consolidate a loan?
What is the interest rate on a consolidation loan?
When do I begin repayment?
Are there different repayment plans?
How do I apply for a Direct Consolidation Loan?
Whom do I contact if I have questions about consolidation?

Resources

https://studentaid.ed.gov/sa/repay-loans/understand/plans

https://studentaid.ed.gov/sa/sites/default/files/your-federal-student-loans.pdf

http://www.finaid.org/loans/default.phtml

http://www.direct.ed.gov/calc.html