When it comes to repaying your student loan debt, it is really important to make sure that you are well informed when it comes to all of your options and available benefits. Many recent graduates are not really sure how to get started when it comes time to pay back their student loans. It can be quite overwhelming, especially if you haven’t made any payments towards the loans prior to graduation. The good news is that it doesn’t have to be completely stressful. Here are a few facts that all recent grads should be aware of before repaying their student debt.
There Are Options When It Comes to Repayment
That’s right! There are actually quite a few options for you to consider when it comes to repaying your student loans. Before you start paying on your loans, make a detailed list of each and every student loan that you have taken out. Include the loan servicer, loan amount, minimum monthly payment and terms of the loan. If it looks like you won’t be financially able to stay on top of your accounts, you may consider some of these options to help make your student debt more affordable for you. Consider federal income driven repayment plans, federal direct consolidation loans, or private consolidation and refinancing. You may even be eligible for some type of student loan forgiveness programs.
You May Benefit from a Direct Consolidation Loan
Direct Consolidation is definitely something that a lot of recent grads consider. The good news is that it can be a great option, for some student debtors. Just remember that it isn’t a one size fits all solution for everyone. A direct consolidation loan is typically ideal for debtors that don’t have the creditworthiness required to use private refinancing and consolidation options. It will help to combine your loans into one single loan with one monthly payment. This is ideal for most, as it is easier to manage. You may also lock in a lower interest rate, since they take the weighted average of all of your loans.
Refinancing Your Loans May Give You Better Terms
Another great option is student loan refinancing, especially when it comes to getting better loan terms. Most of the time when you refinance your student loans you will be given terms anywhere from five years to fifteen years. Direct consolidation loans from the federal government are often drawn out over a period of twenty to thirty years. This can mean lower monthly payments, but far more interest paid over time. If you can afford the larger monthly payment, really consider refinancing as a viable option to help you with shortening loan terms.
Student Debt Scams Are Running Rampant
Before you do any sort of consolidation or refinancing, it is important to be aware of the fact that student debt scams are on the rise. There are companies out there that prey on recent grads. They may offer to refinance or consolidate your loans, and some of these companies are actually legit. Others, however, may just take your money and do nothing with your loans. Make sure that you do some research before you choose a lender to help you manage your student loan debt. This will help you to avoid these scam artists and protect your financial future.
It is Important to Know Your Loan Details
We already mentioned writing down all of your loan details and keeping it in a safe place, but why is that so important? When you know your details, you are better able to manage the debt and make timely payments on your account. Believe it or not, there are actually a lot of student debtors out there that have no clue the total amount of their loans. Some don’t even know their minimum payments, interest rates and other important details. Without this information, it is impossible to know if refinancing or consolidating will save you money in the long run. Each situation is different.
Grace Periods Can Help Recent Grads Get On Their Feet First
When you first graduate, don’t freak out right away! Most loans will have some sort of grace period to help you transition from education life to working life before you have to make your first payment. This can really be a saving grace (pun intended). The general rule of thumb is that you will have approximately six months from the time you graduate before you will have to make your first payment. Sometimes, however, the grace period may be different on private loans and federal Direct PLUS loans. Make sure that you know your grace period so that you can make your payments on time.
Paying Off Loans with Higher Interest Rates Can Help You Save
If you have multiple loans, as most students do upon graduation, you will want to focus first on the loans that carry a higher interest rate. If you get these loans paid off first, you can then work on the loans with lower interest rates. This will help you to save money in the long run.
Setting a Budget is Essential
Last, but certainly not least, it is really important to set a budget (and stick to it). Transitioning to the working world can be stressful, and it may seem tempting to just spend when you want to. Creating a budget will actually help you to ensure that you can afford your monthly payments, along with your other financial obligations. As hard as it seems, try to stick to the budget and you will start to see your debt slowly fade away as you make your payments in a timely manner.