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Student Loan Debt Management

Like any other debt, your student loan is a serious financial obligation that must be repaid. In addition to the amount you borrow (called the principal), you will be charged interest for the use of the funds.

A word to the wise: You should keep your student loan debt to a minimum. You may want to save some of that graduation money or work a part-time job to cover expenses such as gas, food, and phone. You also may want to pay interest as it accrues on your loan(s) which will leave you with a smaller balance when you enter repayment.

A rule of thumb is that your student loan payments should not exceed 8% of your anticipated gross income after graduation. In this region, the average undergraduate student accumulates student loan debt of about $20,000. With interest at 6.8%, this amounts to an estimated payment of $230 per month for 10 years under the Standard Repayment Plan. Using the recommended guideline of the 8% debt-to-income ratio, you would need an annual income of about $34,500.

Student loan lenders/servicers have options that may help make your monthly payment more manageable. Repayment options include: Standard, Income-Sensitive, Income-Based, Graduated, or Extended plans. For more information visit repayment options or contact your lender/servicer to find out which plan is best for you. If you have a Direct Loan, the federal government through the U.S. Department of Education is your lender.

Don’t Jeopardize Your Future Borrowing Power!

Failure to make your monthly payments on time can adversely affect your credit and your future ability to borrow for other purposes. Make your payments promptly! If you cannot make a scheduled student loan payment, for any reason, immediately contact your lender/servicer. It’s possible that your lender/servicer can help you take steps to prevent your loan from becoming delinquent and going into default.

Lenders/servicers want to make your payment plan easy and convenient. There may be different methods available to make your student loan payments. Check with your lender/servicer or loan repayment center to determine the options available to you. They may include:

  • Automatic Payment or ACH – Your student loan payment is deducted automatically from your checking or savings account each month. This is the most convenient method to repay your student loan. Some lenders/servicers offer a .25% discount on your interest rate if you participate in this payment method.
  • Online Payment – Make easy and secure payments online, totally at your control. To make an online payment, you will have to log in to a secure website, enter information about your checking or savings account, and process the transaction. Once you have established an online payment, future payments are generally very easy to complete.
  • Payment by Phone – Simply call your lender/servicer to arrange a payment. Your lender/servicer will also need information about your checking or savings account in order to process the payment.
  • Monthly Billing Statements – You will receive a monthly billing statement. Simply complete a check for the payment due and mail it to your lender/servicer.

When Does Repayment Begin?

Your loan will enter repayment at the end of the grace period. A grace period is a time frame in which payments are not required. The length of time may vary depending on the type of loan. If you have a Federal Stafford loan, you will receive a six-month grace period after you are no longer attending school at least half-time. Once the grace period has expired, you will have to start making payments on the principal and interest of your loan(s). Parent Loan for Undergraduate Students (PLUS) loans and Consolidation loans do not receive a grace period.

If you have a Federal Unsubsidized Stafford loan, interest has been accruing since the time the loan was disbursed. All unpaid interest will be capitalized at the time your loan enters repayment. This is a process that adds the unpaid interest to the principal balance. Remember, interest is charged on the total principal due after the accrued interest is capitalized. This means you will pay interest on the interest that has been added to the principal.

If you re-enroll at least half-time at an eligible school before your grace period expires, your loan will return to its former in-school status and the repayment will again be postponed. In this case, when you later leave school, your grace period will start over. However, if you re-enroll after the grace period has expired you will not be eligible for an additional grace period but you may be able to postpone your payments through a deferment or a forbearance.

Repayment Checklist

  • Estimate your future earnings to determine how much you can afford to pay.
  • Contact your lender/servicer before your grace period expires. Discuss any concerns before you begin repaying your loan.
  • If you have multiple lenders/servicers, be sure to contact each one. Treat each loan as a separate debt.
  • Don’t ignore correspondence from your lender/servicer, loan repayment center, or SLND.
  • Keep copies of all correspondence, canceled checks, and any forms you sign.
  • Call your lender or loan repayment center immediately if you are having difficulty making your monthly payment, have questions, or have any other circumstances affecting your loan repayment.

Your Rights As a Student Loan Borrower

  • You are entitled to a repayment period of at least five years unless your minimum monthly payment (set by regulations) results in a lesser payment term. The maximum repayment term can be either 10 or 25 years, depending on the total loan balance and date of the first disbursement.
  • You have a right to repay the loan in whole or in part at any time without penalty.
  • You are entitled to a copy of your repayment schedule and financial disclosure statement provided by your lender/servicer or loan repayment center.
  • You have a right to be informed in writing if your lender/servicer sells your student loan or otherwise transfers the right to receive payment.
  • You have a right to defer payments for a specific period of time if you meet the eligibility requirements and submit the necessary documentation.
  • You have a right to examine the federal and state regulations governing the student loan program. Your lender/servicer or loan repayment center will have a copy of this information.

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