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How to Stay on Top of Student Loan Debt

The biggest concern graduates have aside from finding a full-time job after graduation is that in six months their student loan repayments start. The challenging job market has made it increasingly difficult for the graduates to repay their student loans. Here are some tips I feel can be helpful in repaying your student loans: Keep Everything – One of the most important things while repaying your student loans is to make sure you keep track of all papers and balances. If you have a file cabinet at home, I suggest creating a file to hold all of your statements, paperwork, and receipts. The biggest part of staying on track, is keeping everything organized. Set Up a Monthly Budget – It is always good to create some sort of monthly budget. The first thing I did when I graduated was take a look at my monthly income and monthly spending. I created my own monthly budget and broke it down into a few different categories.  I set up a spreadsheet similar to this:

Monthly Income $2,000.00
   
Monthly Expenses  
   
Student Loan Repayment $350.00
Housing/Utilities $600.00
Car Payment $200.00
Car Insurance $118.00
Gas $100.00
Entertainment $75.00
Food/ Home Goods $200.00
Emergency $50.00
Clothing $50.00
   
Expenses Total $1,743.00
   
Remaining Funds $257.00

With this budget, I am able to watch my spending and make sure I always have money to pay my student loans. Another thing I try to do is put a little more money towards the principal whenever I can. When you are repaying your loan, not all of the money goes to the principal. Some of the money paid monthly is taken and applied to the interest. It is very important to let your lender know that any money repaid on top of your monthly balance be applied to the principal balance. I really suggest that once you are done with school and getting ready to repay your student loans you take some time to create a similar budget. It drastically reduces the stress of repaying student loans.

Speak to your Lender and Financial Aid Advisor–Many schools require students to speak with a Financial Aid advisor before graduation. This is called an exit interview. The Financial Aid advisor will explain the different steps in repaying your loans and the different tools that can assist you. Even if your school doesn’t require you to speak with a Financial Aid advisor, I highly suggest that you do. Your Lender or Financial Aid Advisor will be able to talk about consolidating your loans, your deferment options, how forbearance works, how to avoid default, and work with you to set up a repayment plan that fits you.

Stay in Contact with your Lender – Usually with repaying student loans, you are given a six month grace period. Within this six month period it is a good idea to contact your loan holder. When contacting the loan holder, make sure they have your correct address, phone number, and email. It is also a good time to ask the loan holder about any repayment plans they offer. If you are having economic hardship or other factors that won’t allow you to repay your loan this is a good time to ask about deferment or forbearance. If at any time during your repayment schedule you have a change of address, phone, name, or email it is a good idea to contact the loan holder with the changes.

Avoiding Default The most important thing you need to do while repaying your student loans is to avoid default.  When you don’t repay your student loan on time, you are delinquent. If you stay delinquent for a period of time you move into default. Once you are in default the entire balance of the loan becomes due. Along with having to pay the entire loan, you may become ineligible for future financial aid. The loan holder then has the capability to add an extra collection charge to every payment, they can also seize part of your tax refund or wages to ensure the loan is repaid. To avoid falling into default make sure you contact your loan holder when having trouble repaying your loans. Sometimes loan holders can reduce your payment for a month, or they give you the option of forbearance. Forbearance is when your payments are stopped for a period of time.

During forbearance it is possible that you will still be charged interest on the loan, it is important to contact your loan holder and see how they handle forbearances. These are just some steps you can take to make sure your student loans are repaid on time and that you are able to stay out of default. The most important factor in staying current on your student loans is accepting the responsibility of managing your money and paying your loans on time.


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