Take a deep breath. Repaying your student loans is as time honored a tradition as college itself. Each part of the education financing machine is well-oiled and inspected, and you’re in for a pleasant surprise here – there are options to help you succeed in your repayment, alternative routes to help you manage your debt responsibly, and genuine benefits lurking around in the corners. Let’s shine a light on some of them, and talk about best practices for managing this new responsibility.
What are we working with, exactly?
First things first. What types of education loans do you have and what are the balances on those loans? You need a comprehensive list of all of your loans. If you’re just getting started and aren’t sure, start with your school’s financial aid office. After that, go to NSLDS.ed.gov, the Department of Education’s national database for financial aid. They collect data on behalf of all Title IV loan and grant recipients (which probably includes you!) so your loan info is stored in a central location. This is not the time to stick your head in the sand; get organized now. Keep in mind any private student loans you have won't be listed on the NSLDS website, so you'll need to contact your lenders or servicers directly to get info on those loans.
Shall we refinance?
“Refinance” is a big, important word in the financial aid game. Refinancing means borrowing a new loan – where your new lender pays off your old loan. You need a good financial profile (credit score, payment history, etc) to refinance, so keep that in mind. If your profile isn’t terrific, anticipate needing a co-signer, which will usually be a parent or a spouse.
There are definite, measurable benefits to refinancing. You could be eligible for a substantial decrease in your interest rate, which will translate to a lower payment and a shorter repayment term. Plus, you can lock in variable interest rates, which will bring substantial peace of mind. But – and this is important – if you refinance, you may lose some benefits on your federal student loans as well. Some benefits, such as public service loan forgiveness (PSLF) repayment and other benefits specific to the federal student loan program, disappear when you refinance. So you’ll need to talk to your lender about whether refinancing is best for you. Don’t assume either way, and make sure you understand the benefits and risks, either way.
Let's be honest, recent college graduates can make some poor financial decisions. Riding high on the excitement of a new job/living arrangement/freedom, it can be tempting to increase your monthly expenditures to a degree that negatively impacts your ability to repay debts, especially in the long term. Take a deep breath before you invest in a hefty car payment, exciting new apartment, or even everyday items like dinners out and new clothes. The more aggressive you can be with repaying your student loans, the better. A few years down the line, you will be very pleased with the decision you made to reduce your debt load.
Stay in touch
Can’t make your payment this month? Worried about how this year’s repayment will affect your ability to make a major purchase? In over your head on other debts? The answer for all of these issues is the same – it’s time to call your servicer. Staying in touch with your loan servicer will ensure that your loan repayment is manageable and doesn’t contribute needless stress to your already busy life. Loan repayment is a part of your adult responsibilities, but it shouldn’t be a burden. Stay in touch with your servicer, and be honest about what you can afford. You’ll find their reps to be helpful, knowledgeable, and understanding – often a welcome change from the customer service to which we’ve all become accustomed!
Ask for forgiveness
You may be eligible for loan forgiveness programs, so don’t forget to check. Start with RISLA’s programs at https://www.risla.com/reward-programs, and ask your loan servicers about student loan forgiveness programs that may affect you based on your current employment status, type of loan, and other variables. Never leave money on the table – it’s the first rule of loan repayment!
Managing your student loan repayment doesn’t have to be a nightmare of bills and unmanageable budgets. It should be part of a navigable route to financial freedom, and a necessary step as you reap the benefits of your college education. Be responsible, communicative, and opportunistic, and you’ll find that your loans fade seamlessly into the background of your life – and that’s exactly what you want.