The end of the school year brings graduation celebrations for many college students and their families. If you’re one of them, there are some rules and changes that are bound to impact your wallet. But we have you covered. Here with what you need to know is Shari O.
How many folks nowadays have student loans?
Almost 70% of college graduates have student debt that often exceeds $40,000 (QAVERFIY) so we’re talking about a heck of a lot of people and dollars.
The thing is, with graduation, college students typically face the end of their six to nine month ‘no payment’ grace period (QAVERIFY) on their student loans and loan statements begin arriving in the mail box, catching many unprepared. Worse yet, some students change addresses so many times, they don’t get their loan statements which can be even worse.
So what is a recent graduate supposed to do?
CONTACTING YOUR LENDER-SERVICER
- National Student Loan Data System
- Check Original Loan Documents
The first step is to keep an eye on the calendar. If you’re supposed to start receiving statements, but don’t, contact your lender or the servicer managing your loan (sometimes they’re the same, other times they’re not). If you moved around a lot, you’re the one responsible for insuring they have the correct address. If you have Federal loans, you can log on to the Education Department’s National Student Loan Data System for contact information (QAVERIFY). You’ll need your Federal Student Aid ID – a user name and password combination – but the website will help you create one if you don’t have one yet (QAVERIFY). Checking your original loans documents is another option, especially if you have private loans. And once you make contact, you’ll want to be sure to ask about any alternative repayment options that may be available.
How do alternative repayment options work?
ALTERNATIVE REPAYMENT OPTIONS
- Automatic 10 Year Repayment
- Income Based
- Extend Term
- Debt Forgiveness
Federal loan borrowers are generally automatically enrolled in a standard ten year repayment plan (QAVERIFY), which has the benefit of being the fastest way to pay down a loan, but it can sometimes be difficult for recent grads to come up with those bigger payments right away. Jobs may take longer to find, pay less than expected, and living expenses often cost more. So the Federal government has some more flexible options to accommodate this by lowing the payment or extending the repayment period (QAVERIFY). Or you may be able to tie your loan payment to your income. Income based repayment plans allow borrowers to pay what they can afford, setting payments as a percentage of income. The intent is to reduce borrower defaults (QAVERIFY). Heck, you may even be able to have some debt forgiven after 10, 20, or 25 years for example in certain public service jobs (QAVERIFY). Or you can simple ask to defer beginning to repay your loans while you look for a job or continue your education, for example (QAVERIFY). Rules and plans vary but you can use the Federal Repayment Estimator (QAVERIFY) to see which you may qualify for and which would be best for you. Just remember, interest may continue to accrue (QAVERIFY) and the longer you take to repay your student debt, the more it may ultimately wind up costing you. One important note is that these rules are also often tweaked from one Administration to the next (QAVERIFY). Some changes that could impact you if you’re repaying student debt include, for example, less consequences for companies, like Navient (QAVERIFY) for example, that service student loans for Federal Student Aid (the agency within the Department of Education that oversees student loans, but outsources loan servicing) (QAVERIFY), essentially the face of the student loan industry, and have been accused of misdirecting payments, losing paperwork or charging the wrong interest rate. It may also be more difficult for borrowers to apply for and stay enrolled in income based payment plans. That’s because borrowers are required to document their income with IRS information. The IRS Data Retrieval Tool (circa 2009) enabled borrowers to direct their tax data to services for this purpose as well as for filling in the Free Application for Student aid (FAFSA) (QAVERIFY). The DRT was taken down (in March) because it was being used to file fraudulent returns and is rumored will be down until at least October (QAVERIFY). The fees for falling behind on student debt may also wind up costly you more (QAVERIFY). So if you’re a recent grad with student loans, it may behoove you to look into any help you may need sooner rather than later.