What to Do Now That the Student Loan Grace Period Is Over
College graduates with government student loans usually receive a six-month grace period after convening before they have to start making payments . This means that it is time for the graduates of the spring of 2018 to start paying.
Student loan debt can be huge. If you’re unsure where to start, follow this checklist.
Check out your loans
You need to know the basics of your student loans: who serves (and this may change over time), how much you owe, what is your repayment plan, how much you owe monthly, interest rate, etc. Write it down somewhere below so you can keep track of everything.
For federal loans, go to the Department of Education’s database for all the information you need. If you have private loans, call your lender (s) and ask for all the information you need.
Consider a different repayment plan
Once you get the basics down, you need to control your budget. Subtract your monthly expenses from your income and see how much you have left to pay off your student loan. You should always pay the minimum, but if you can afford a little more each month – say, by having a roommate or cutting down on some other extraneous expenses – then put that aside against your debts.
If you’re having trouble after calculating your budget, consider switching your repayment plan to an income-based repayment plan. These plans require you to pay a percentage of your income if you are below a certain income threshold. Call a service center and ask about the different options available to you. As we wrote earlier, “Income-driven repayment plans may not necessarily give you the lowest monthly value of all repayment options, but … you need to be a member of an income-driven repayment plan to be eligible for Government Loan Forgiveness. services. program or other options for forgiveness. “
If you absolutely cannot afford the payout (or do not have a job yet), consider deferring or abstaining. As we said earlier:
Abstinence means that your payments are temporarily reduced, although interest continues to rise, while you may receive deferred cancellation of interest, depending on the type of loan you have . You will need to apply for your service provider before you default, and something that you are applying for will depend on factors such as your employment status and payment history.
Ideally, before that happens, explore other repayment options and find one that works for you.
Set up automatic payments
Automatic payments ensure that you make all payments on time and, depending on your lender, this could mean a 0.25 to 0.50 percent reduction in your interest rate. Modest, yes, but it’s something.
Learn about employer contributions
As student loan arrears become an increasing burden on workers, more and more employers are offering contributions to offset their employees ‘ debt . According to the Society for Human Resource Management, these student loan repayment plans allow employers to pay monthly installments directly to the main balance sheet. While these programs are not yet particularly widespread, it is worth asking your employer if this can be done, or giving more attention to potential employers who do it.
Always pay the minimum payment
Failure to pay anything on your loans means they will eventually go past due, damaging your credit rating and long-term finances. Make at least the minimum payment absolutely every month.
Don’t fall victim to a loan
Chances are, if you have a student loan in arrears, you will be approached by someone who claims their company can help you pay off your loans faster if you pay them a certain amount of money each month. They usually say they will help “forgive your debt.” Be aware that this is a scam . No one can magically make your debt disappear; Loan forgiveness is extremely rare, and if you pay someone to “help” pay off the loan, it will most likely result in a ton of money lost and loan repayments delayed, which can lead to low wages, confiscation of tax returns, etc. there are private loans, there will be no forgiveness at all, so be on the lookout.
Don’t trust these people. Hang up or notify your state attorney general or the FTC. It’s natural to want an easy way out, but you have to pay back what you owe. Here’s some more information on how to recognize a scam:
Put more on your core balance
If you can change it, you can require any additional payments in excess of your monthly minimum to be applied to the principal balance of your loans, not interest. The benefit is twofold: your balance as a whole decreases, which means less payouts, and your interest payments also decrease.
However, as we said earlier , service providers won’t just apply your payments out of the goodness of their soul. You need to instruct them to do this, and then check to see if it was done properly. Here you can find a letter form that you can send to them.
How to prioritize many financial needs
At a young age, paying off loans, saving for retirement, building a reserve fund, and getting on track may seem impossible. Chances are, you start out with a low salary, and it will seem like there isn’t enough money to do whatever you want and need to do.
And you’re right, no. But that doesn’t mean you can’t come up with a sensible plan. Here’s what to prioritize:
1. Make sure you have paid for everything you need: rent, transportation, food, clothing, etc.
2. Make the minimum monthly payments on student loans.
3. Increase your emergency fund. Money in 401 (k) won’t help you if your car breaks down. The amount varies, but your first goal should be $ 1,000, which you can then develop. This can be done simultaneously with # 2. Automate everything!
