According to credit reporting agency TransUnion, the average student loan debt rose 30 percent between 2007 and last year to $23,829. And six months after graduation, many college students will face the due date for their first monthly payment on their student loans, regardless of whether they are federal or private loans. Sarah J. Halpin, CERTIFIED FINANCIAL PLANNERTM Associate Vice President-Investments with the Danforth Group of Wells Fargo Advisors has some tips for new grads in managing their student loans.
1. Understand Your Loans
How much. To Whom. Repayment Options. It's essential to know the terms of your loan in order to evaluate your options for repayment or to request a deferment when your grace period ends. For private loans ask your lender or check out the national student loan data system www.nslds.ed.gov <
http://www.nslds.ed.gov> which shows loan details on federal loans. Standard repayment period on federal loans is 10 years. There are other options if you can't afford your monthly payments such as an extended repayment period and an income based repayment option. Information can be found at the www.studentaid.ed.gov <http://www.studentaid.ed.gov> site.
2. Postpone repayment if necessary. If you're having trouble making your payments, are unemployed or are still in school, there are two ways to temporarily postpone your payments.
Deferments or postponing loan payments are for federal loans only and are guaranteed if you meet certain eligibility requirements. For more information, go to the Department of Education's student aid website, www.studentaid.ed.gov <
Forbearances are for federal and private loans, and are granted at the lender's discretion.
Forbearance, allows you to temporarily stop making payments on your loan, temporarily make smaller payments, or extend the time for making payments.
During deferment or forbearance, you may be responsible for the interest that accrues so you may end up increasing the total amount you repay. But paying more over the life of the loan is better than the consequences of delinquency and default.
The Consumer Financial Protection Bureau recently made available a tool called Student Debt Repayment Assistant designed to help inform you around your student loan repayment options. Information can be found at www.consumerfinance.gov <
http://www.consumerfinance.gov> and www.studentloanborrowerassistance.org <http://www.studentloanborrowerassistance.org> .
3. Consolidate your private student loans. Since students reapply each year for student loans, they may have multiple student loans when they graduate. Contact your lender and check the benefits of combining multiple loans into one new loan with one simplified monthly payment. Check that you will not lose access to borrower protections.
Don't ignore payments otherwise your student loan debt can become overwhelming. And missing a few payments can hamper your credit score which is not a good scenario when you are starting out on your own and job hunting. If payments become a problem, contact your lender as soon as possible to discuss options.
Department of Education's student aid website, www.studentaid.ed.gov <
The information provided is general in nature and may not apply to your personal investment situation. Individuals should consult with their chosen financial professional before making any decisions. Investment services are offered through Wells Fargo Advisors, LLC member SIPC. Neither Wells Fargo Advisors nor its financial professionals are tax or legal advisors.