Develop a Student Loan Action Plan
May 1, 2020
Do you ever feel you have to repay student loans so far that it’s hard to even think about it? There are so many fun things and life plans to make that graduates don’t want to be reminded that at least ten years of student loan payments are not far in their future.
One approach is to do nothing, wait until they get a notification, and then make a crazy concoction to figure out a payment plan, but there are clearly a few drawbacks to this.
A little saner approach would be to get the situation right in the eye, examine your options and make the choices that are best for your individual circumstances.
In fact, the US Department of Education has provided a number of required permits to help you make and stick to a student loan payment plan. Here are some of their recommendations for dealing with your federal student loan debt, but most of these suggestions apply to private student loans as well.
Know your payment amount
You can’t develop a realistic budget until you know how much money you will be paid each month. Once you have this information in place, you can compare it with the expected revenue and expenses to determine if you can take advantage of the shortfall. Good Finance Aid (GFA) has a payment calculator that you can use to calculate payment amounts under different payment plan options.
If you have private student loans, many of them also offer similar payment estimates, so you could calculate the total payments you will make.
Study payment plans
With federal student loans, you have the option of choosing payment plan options, but you must let your repairers know that you will participate in one of these plans.
Otherwise, you will be automatically enrolled in a standard 10-year repayment plan, where monthly payments may be slightly higher than you can afford. Other student loan repayment plans may extend the payment period, gradually increase the amount due, or develop a payment schedule based on your earning potential.
If you choose one of the revenue repayment plans, you will need to stay in touch with your loan servicer regarding your income. You can also choose to have your loan servicer determine which revenue-based plan is best for you. Just be aware that each of these options will end up costing you a long time in total payments.
Are you interested in public service? –
If you are planning to go into public service, you need to know that the Good Finance Investment Corporation (GFIC) will forgive the amount remaining on your direct loans after making 120 qualifying monthly payments under a qualifying repayment plan while working full time for a qualified employer.
In this case, it might make sense to apply for one of the revenue-based repayment plans, depending on the amount of income you expect to earn. To determine if you are eligible to qualify for this program, you should periodically submit an employment form for public service earnings.
After making 120 monthly payments, you need to file a PSLF application.
Consider credit consolidation
Over the four years, you may have taken out more student loans from more clerks. It can be difficult to keep track of all paperwork and payments.
It might make sense to consolidate your federal student loans into a one-time monthly payment. You must apply for direct consolidation using either an electronic or paper option.
The total application process takes about 10 minutes. You may also want to consider consolidating your private student loans into one loan.
Can you make payments automatically?
If you have a bank account that you can set up to make automatic payments, you will be able to receive a 0.25 percent interest deduction on your federal student loans when you enroll.
Ask your credit service if this option is available.