Amidst the excitement of graduation, there are few thoughts of repaying student loans. Unfortunately, the repayment period will soon begin. Failure to repay these loans so can have disastrous consequences. Wage garnishments, declining credit scores, and even withholding of Social Security benefits or tax refunds are just a few.
Smart borrowers take charge of student loans long before the six-month grace period for repayment has expired. They learn who their lenders are and how much money is owed to each one. The Federal Family Education Loan Program (FEEL) and the Direct Loan Program were the two lenders, until recently.
As of July 1, all loans will be issued through the Direct Loan Program.
Federal student loans can be verified online through the National Student Loan Data System. In addition to federal loans, some college grads have private student loans. Contact information for these lenders can be found on the original loan agreement or a recent billing statement.
The financial aid office at the school may also have these details.
Grads should find out whether starting to make payments before the end of the grace period will save money. Private loans should be paid off as quickly as possible because these often have variable interest rates.
Repayment plans for federal loans can be altered as needed.
Options include extended repayment up to 25 years, income-based repayment, and graduated repayment, which involves initially paying interest and then making increasing payments.
When paying more than the minimum required monthly payment, borrowers should include a note requesting that the additional money be applied to principal. Loan consolidation through the Direct Loan Program may prove beneficial by extending the repayment period.
A diligent approach should prevent having to resort to bad credit auto financing due to a horrible credit score from failure to repay student loans.
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