Many college students borrow money to help pay for their education. If you are graduating with student loan debt, you may be overwhelmed by the amount you owe. Six months after you stop taking courses (at least half-time) -- whether or not you've graduated -- your federal student loan bills starting coming due.
Failing to pay your federal student loan on time is very costly. The government charges late fees, and -- if you let your bills go unpaid for too long -- collection fees. And, of course, they report your delinquency to the credit bureaus, which makes it hard for you to get a credit card, car loan, mortgage, or, in some cases, certain kinds of jobs.
The good news is that there is no penalty for paying down the loan ahead of time. And the government has many different kinds of payment plans that can reduce the pain of those bills.
These tips may help you repay your loans faster than you think.
1. Use student loan exit counseling. Before leaving college you are required to attend student loan exit counseling. Use this opportunity to make sure you understand your rights and responsibilities for student loans repayment.
2. Pay attention to paperwork. Make sure your lenders have your correct address. Always read everything they send to you, and correct errors promptly. Complete forms on time, and know when you need to start paying back your student loans.
3. Review all your loans. Order your loans from those with the highest interest rates to the lowest. If you can afford to pay more than the minimum, put your money towards the student loan with the highest interest rate.
4. Accelerate your payments. Resist the temptation to spend your whole paycheck, and instead use spare cash to increase your loan payments. This will reduce the total amount of interest you pay.
5. Go for graduated payments. A graduated student loan repayment plan means your payments start off low, and are raised every two years. This strategy works well if your income will likely increase steadily.
6. Consider consolidation. Consolidation lets you combine several federal loans into one. This may lower your interest costs, particularly if some of your loans have a variable rate. You may risk losing the deferment and forbearance rights of your current federal loans if you consolidate.
7. Delay with a deferment. A deferment lets you temporarily suspend your loan payments. Unemployment or economic hardship may qualify you for deferment, as well as being in school, pursuing graduate studies, or being in an internship or residency program. Working mothers and those on parental leave may also qualify. Check whether you will still be charged interest while your loan is in deferment.
8. Keep on top of payments. If you miss payments, you may incur financial penalties, which can be especially high if your lender sends your loan to a collection agency. Remember, bankruptcy usually does not eliminate student loan debt.
9. Student loans and your credit score. Making your loan payments on time will help you build your credit score, and may help you qualify for new credit and lower interest rates.
10. Jobs that help you pay back student loans. Here are several occupations that may help you get some of your debt forgiven:
- Teaching: If you have a federal loan and teach in a low-income area, you may be eligible to have a portion of the loan cancelled.
- Dentistry and Medicine: Health care professionals may be able to have their loans forgiven by working with underserved groups or regions.
- Law: Law students who work in public interest or a nonprofit position may be eligible for government grants to pay off student loans.
- Public service: The U.S. government offers a loan forgiveness program for employees who have made at least 120 qualifying monthly payments.
- Volunteering: A number of volunteer programs make you eligible for grants for paying back student loans. These include the AmeriCorps, Peace Corps, and the Volunteers in Service to America.
Your student loans help you get the education you need to get a good start in life. By paying them back, they'll also help you build your credit history and help you learn how to manage your money.