How to manage your student loan repayment – my blog
I freely admit that our current student loan system is confusing. A student could potentially receive four different types of student loans per semester, with all four being repaid to different places. With different dollar amounts, different lenders, and different repayment terms for each loan, I'm not surprised that so many college seniors have struggled over the years to start repaying and manage the repayment of their student loans.
Where to start
The student loan repayment process starts before you graduate. Your college or university is required by law to notify you of your need to complete exit loan counseling. If you have taken out a federal direct stafford loan or a federal perkins loan, you will receive this notice.
This exit counseling session will guide you through the repayment process, gather your contact information, show you the exact balance of your loans, help you create a monthly budget, and show you when your expected repayment start date is after your grace period. This is an excellent resource that should never be overlooked. But it's usually online – for many students or graduates, it's all about what you make of it.
That takes care of two different types of loans, but what about the other two? Parent PLUS loans and private student loans are the other types of loans and often the easiest to repay. Especially the private student loans.
One reason for this is that repayment often begins immediately after disbursement. So loan payments don't differ for years, until you've had enough time after graduation to completely forget you ever received the loan. Pay them back immediately. Also, private lenders are much better at tracking their loans and making sure you start paying them back. This is an example where the private sector far outweighs the public sector.
Resources for your student loans
For all federal student loans, including stafford loans, perkins loans, and parent PLUS loans, you can go through the national student loan data system or https://nslds.Gov to access your complete federal loan history.
This website contains a database of all loans disbursed, updated by the schools you attend. They send updates to this database every semester, so it's often a great resource for students and parents.
The department of education has many of its resources on studentloans.Gov shifted to change repayment schedules, consolidate loans, and more. While the national student loan data system is great for checking your balances and history, in studentloans.Gov to create your own student loan repayment plan.
The other option is to check your free credit report. This way you can get information on loans that are currently being repaid and reported to a credit bureau. If you are late on any of these loans, this is the best place to identify the problem and work to fix it. You can access your credit report for free on annualcreditreport.Check com.
Private student loan options
When you work with a private student loan lender, you have fewer options when it comes to programs and services. Typically, you need to change lenders through a process called student loan refinancing.
Student loan refinancing occurs when you take out a new loan to replace your other student loans. This can be of great benefit as you may be able to get a lower interest rate or a longer loan term – both of which can lower your monthly payment.
If you're thinking about refinancing student loans, check out credible. They are a student loan comparison tool that will get you multiple options in 2 minutes with no credit check required. We are partners with credible and highly recommend them. Check out credible here. College investor readers receive a bonus of up to $750 when they refinance with credible!
Should I consolidate?
With so many different lenders, interest rates, due dates, and payment systems, consolidating student loans is an incredibly attractive option. I would recommend that for most people, the good with consolidation far outweighs the bad. If you are behind on your loan payments or can't track all the loans you need to repay, the simplicity of loan consolidation is the best course of action.
However, you lose a number of benefits when you consolidate a loan. This is because you lose most of your options for deferment or forbearance. So if you enroll back in school or suffer from economic hardship, most consolidated loans still need to be repaid. Also, interest rates are all based on your credit score. So if this isn't the best, you may be paying a higher interest rate than you did on your original loans.
However, a slightly higher interest rate is much less damaging than a defaulted student loan or multiple loans that are 60 days past due on your credit report. You can also use loan consolidation to get your loan from a collection agency when you're there.
It's not an easy decision, but one that is often the lesser of two evils.
Final thoughts on managing student loan repayment
Finally, we recommend two last tools that everyone needs to manage their personal finances: personal capital and credit karma. These tools are especially important for student loan borrowers.
Personal capital is afree money management app that lets you track your finances. This is important for everyone as you should always know how much money you have, where it is and where you are spending money. If you are trying to manage student loan repayment, you must have this app.
Next comes credit karma. This app tracks your credit score and credit history. Since student loans affect your credit score, it's great to track your loan payments and your credit score. You want to make sure you're watching your score, avoiding late payments, and using their tips and tricks. Oh, and it's free too.
Do you have any tricks to manage the repayment of your student loans?