It happens to all of us who borrowed for college: notifications from lenders that your student loan payments will soon be due. It's time to craft a plan of attack.
The Not So Fun
It’s important to come to the table with a firm grasp of some details, which can be frustrating for a person who just finished what he thought was the last exam week of his life. Here’s the info you need:
- Types of loans: If you didn't keep records of all of the loans you borrowed along the way, start by contacting the schools financial aid office to get a tally of private and federal loans. From there, hit up NSLDS.ed.gov, the US Department of Education’s central database for student loans. The NSLDS (National Student Loan Data System) has been tracking your loans even if you haven’t been keeping track yourself, so you’ll find most of the info you need with them. For private loans, you'll have to reach out to each lender directly for payment and due date information, if you haven't already received an account statement. Private loans are not listed on NSLDS. Keep in mind most private lenders put the responsibility on you to keep them up to date with your contact information. Just because you haven't received something in the mail, doesn't mean that you don't have to pay. Do the work and put in the research.
- Due dates and monthly payments. You’ve got to get a hold of this information quickly, because it’s the make-or-break data that you need to plan a budget, set up a payment system, and negotiate alternative arrangements (like income-driven repayment, forbearances or deferments - see below) where necessary. Each of your loans will come equipped with a default payment structure and chances are it isn’t going to be the best one for you, in terms of paying off your loans the fastest and paying the least amount of interest. Figure out your due dates and minimum payment amounts for ALL loans, and come to the table prepared to discuss those with loan servicers. As you’ll see in a moment, you’ll find that you may be able to re-arrange things to better meet your needs.
- Repayment options. Start with the default repayment option (on federal loans, this is called the "standard" repayment plan) and look at what else is available. You’ll see that the world of federal student loan repayment is dependent on your priorities – do you want to repay quickly? Do you need to keep payments low while you get the rest of your life together? Are you starting a new job or otherwise working to figure out how your budget is going to look 6 months or a year from today? Whatever your world looks like today, there’s a federal student loan repayment plan to fit your needs. On private loans, your options for repayment plans (click here to see RISLA's payment plan options) are likely to be much more limited, but contact your lender to find out what is available.
Starting on your loan repayment isn’t all doom and gloom. First of all, it means you’re starting the path to a debt free existence, which is awesome. Second, it means you’re getting your budget together and starting to plan for the future, which is a pretty great way to celebrate completing your education and starting out your adult life! Here are the high points:
- Your payment plan isn't written in stone. In fact, on federal loans you can change it, for free, with ease. If you aren’t sure what to do, call your loan servicer. You can also explore the federal loan repayment options here. On private loans, your options are going to be much more limited, but with the ability to reduce your federal loan payment with ease, you may find your private loan payments to be more affordable for you. Learn about RISLA's income-based repayment plan.
- Your loan servicer will likely try to work with you. Laid off or unsure about your next paycheck? Thrown off by a big expense or a life change? Just can’t manage it this month? Contact your loan servicer! Your loan servicer wants to work with you. They may be able to offer you forbearance, deferment or a new payment plan to help you make ends meet. The key is, avoidance isn't the answer. If you are having a problem, reach out and explore your options.
- Refinancing could save you a ton of money. Make sure to talk about these options early. Federal consolidation will combine your federal loans, perhaps reducing your monthly payment, but won't reduce your interest rate. If you can refinance your private loans (but be careful to understand what benefits you would lose before refinancing your federal student loans in the private market!), doing so could save you loads of money overall, and could even reduce your monthly payment significantly.
- There are a million ways to avoid default. Student loan repayment isn’t the “pay or repo” debt game to which many consumers have become accustomed. There are options – MANY of them – that will help you to get back on track if you encounter difficulty. Rest easy knowing that your student loans don't need to hang over your head like a guillotine blade. This is a system designed to work with borrowers, and you’re in good hands as long as you stay in touch.
You're treading a well-worn path, and there are plenty of professionals armed and ready with the tools and information you need to tackle your loan repayment with confidence. Talk to them and learn about your options, and you'll be blazing down the loan repayment road, worry-free, in no time.
Looking for ways to reduce your student loan interest rate? Refinancing might be for you? Download our free refinancing guide to determine how it could help you save, or if isn't the right solution for your needs.