Navigating the complex world of student loans can be confusing and time consuming, but understanding your options will enable you to make an informed decision that’s best suited to you.
As your first step, analyze your debt-to-income ratio (or how much of your monthly income goes toward debt payments versus total income). Next, shop around for loans with competitive terms and rates.
1. Know Your Options
When it comes to student loans, it is crucial that you know all your options. Finding the appropriate student loan will enable you to reach your educational goals while simultaneously building financial independence.
Undergraduate students who demonstrate financial need can avail of Direct Subsidized Loans provided by the federal government, with flexible repayment terms and borrower protections not typically found with private lenders.
Many students use student loans to fund their education; however, taking out too many loans could prove to be costly if not used wisely. To avoid becoming trapped by debt-laden repayment plans and loans, take time to explore your other financial aid and payment options and aim towards debt-free graduation.
2. Know Your Rights
Navigating the complex world of student loans requires being aware of your rights. You could, for instance, defer payments, request forbearance or have your debt discharged.
Filing a complaint with either the federal government or consumer advocacy groups that advocate on your behalf may also help. Such groups provide invaluable assistance if issues arise with either your loan servicer or lender.
Federal laws that regulate how lenders do business include the Truth in Lending Act, Equal Credit Opportunity Act and Fair Debt Collection Practices Act – protecting borrowers by prohibiting unfair, abusive and harassing practices by lenders.
3. Know Your Options for Repayment
Repaying student loans requires careful consideration of all your available options to maximize success in managing debt. No matter if you just graduated or still in your grace period before repayment begins – now is always an opportune time to start planning how your payments fit within your budget.
Federal student loans, both subsidized and unsubsidized Direct Loans, offer various repayment plans to help make repayment more manageable. While 10-year plans may be the default option, other plans allow repayment over 20-25 or even 30 years.
Some lenders also offer income-driven repayment plans, which limit your monthly payment based on a percentage of your discretionary income and could save significant sums in interest charges.
4. Know Your Options for Forbearance
When financial difficulties arise, deferment and forbearance can help temporarily postpone loan payments until your situation improves. Before considering forbearance as an option, make sure it fits into your unique circumstances.
Forbearance on student loans temporarily suspends or lowers monthly payments for up to 12 months in order to prevent defaulting, although interest continues accruing during forbearance periods.
5. Know Your Options for Consolidation
Student loans can be an enormous burden. Juggling multiple monthly payment due dates and keeping tabs on interest rates and terms can make repaying debt an unmanageable feat.
Consolidating your loans may make payments simpler and reduce overall cost of borrowing; however, it is essential that you first consider all available options before deciding to consolidate.
One option available to federal student loan borrowers is consolidation through the Direct Consolidation Loan program. This type of consolidation loan combines multiple federal student loans into one large loan with just one payment and single monthly interest payment.