If you graduated from college this year you may have, for the first time, realized how much student loan debt you have. With the average student loan debt at around $29,000 per student, it can be overwhelming to see that number and you may wonder how you are going to pay it back. Well, take a deep breath: you have several options when it comes to repayment. Don’t hesitate to give your student loan servicer a call because they will help you work through your options. Or, you can also follow these 4 steps to get ready for student loan repayment. It’s important to investigate your options and be prepared, but it’s equally important to know a few things you should avoid.
Deferment & Forbearance: These options allow you to temporarily postpone making payments or can reduce your payment for a period of time. Sounds great, right? So, what’s the problem? The problem is your student loans will continue to accrue interest, which could cost you thousands of dollars a year, depending on your student loan debt. Don’t delay the inevitable. You will have to pay back your student loans whether you pay them now or pay them later. Deferment and forbearance are great options if you have no financial means at the time you enter repayment on your student loans, but don’t use them as a way to just delay paying them. If you do need to go this route, try to at least make interest payments on your loans. If you don’t, the interest will capitalize leading to higher student loan debt and higher monthly payments once your deferment or forbearance expires.
Don’t Miss Payments: Make your payments every month and on time. If a loan payment is not made by the due date, the loan becomes delinquent until payment is received. Depending on your servicer or lender, this delinquency can affect your credit report as a negative mark, therefore negatively affecting your credit score. In addition, when you miss monthly payments, your payment will double, then triple, and continue to snowball which may put you in a situation that’s difficult to catch up on.
Avoid Scams: We’ve all heard the saying, “if it sounds too good to be true, it probably is.” It may seem enticing to pay a company to handle the stress of your student loans and promise you low payments or loan forgiveness, which are why these companies exist, but you’ll be wasting your money. Student loan servicers and lenders will not charge fees for finding a repayment plan that fits your needs. The U.S. Department of Education offers several student loan repayment plans and loan forgiveness, cancellation, or discharge for certain circumstances, but all of their services are free of charge.
Being prepared for repayment and understanding what you should avoid are two big steps to successfully paying off your student loans. Just remember, your student loan servicer is there to help you. If you need to adjust your repayment plan or just have questions about your student loans, give them a call.