Hey Graduate! What’s Next for Your Student Loans?

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College commencement was fun, wasn’t it? It’s the only time in higher education when we celebrate academic achievement with all the gusto of a football victory. But if you borrowed while getting that degree, it was also when your student loan repayment process commenced. So, what happens next?

(1)  When does your repayment obligation begin? You get a full six-month “grace period” to find a job and get yourself established financially before you’re required to start repaying your federal student loans. A loan servicer hired by the government to collect your loans will contact you during this period to share vitally important information with you. This includes the exact date your first payment is due — generally within 60 days of the end of your grace period.

Private educational loans may or may not have grace periods. Review the “promissory note” you entered into with your private loan provider for anything you need to know about repayment including your first payment due date. If what you’re looking for isn’t there, contact your loan provider and ask.

(2)  When do your payments start? Virtually all student loans require once-a-month payments on the same date of each month. If the repayment date assigned to you doesn’t work, contact your loan servicer. Servicers will usually renegotiate this date upon request.

(3)  What do you need to do? Any time you move to a new address, or begin using a new email service, provide your loan servicer with your new contact information. Otherwise, information you need to repay your debt won’t reach you. But that won’t absolve you of your payment obligation and, if you begin missing payments, bad things happen to you!

(4)  What decisions do you face? Your biggest decision is your choice of repayment plans. The government offers six options. Its standard plan is the quickest and least expensive way to eliminate college debt. It requires you to repay your loan in 120 equal monthly installments. But what if those monthly payments are too high early in your career, when you’ll probably earn the least you’ll ever earn? Then you should request one of the income-driven repayment plans that limit your monthly payments to a small percentage of your earnings. Such a plan will cost you more in the long run, but it’ll minimize your monthly payments early on. And remember, you can change your repayment plan whenever you want.

You may also need to consider whether you want to consolidate your federal loans in order to qualify for the lowest possible payments and the longest possible repayment period. This can be especially helpful if you are interested in having what’s left of your debt forgiven after 10 or 20 years.

There’ll be more on repayment plans and loan consolidation in the future. For now, congratulations on earning that degree and getting on the road to jettisoning your educational indebtedness!

Up next — how to get your federal student loans forgiven.

College Affordability Solutions has 40 years’ experience in advising borrowers on how to manage their parent and student loans. Call (512) 366-5354 or email collegeafford@gmail.com for help.

Some Good News for College Borrowers

If you’re a parent or student who needs to borrow to help pay for college expenses, your 2016-17 Federal Direct Loans will enjoy the lowest interest rates in five years.

The Federal Direct Loan program provides nine out of every 10 college loans in the United States. Interest rates on 2016-17 Federal Direct Loans will be 0.53% lower than in 2015-16:

Federal Direct Loan Type

2016-17 2015-16
Subsidized

3.76%

4.29%

Unsubsidized

3.76%

4.29%

Graduate Student PLUS

5.31%

5.84%

Parent PLUS

6.31%

6.84%

Each year’s Federal Direct Loans interest rates are fixed, meaning they never go up or down, and the interest rates for loans made the year1 are based on the interest rate for 10-year treasury notes auctioned by the government in May.

While lower interest rates are good news, it’s still important to borrow conservatively. For example, a student who borrows the maximum allowable amount of subsidized and unsubsidized loan during his or her freshman year will save only $42 under the new interest rates versus the interest rates in place for 2015-162.

Need strategies for keeping your college debt manageable? College Affordability Solutions brings 40 years of experience in higher education and student loans to advise you. Contact (512) 366-5354 or collegeafford.gmail.com if you want to explore what College Affordability Solutions can do for you.

1    2016-17 Federal Direct Loans are loans whose proceeds are fully or partially disbursed from July 1, 2016 through June 30, 2017. 2015-16 Federal Direct Loans are loans whose proceeds are fully or partially disbursed from July 1, 2015 through June 30, 2016.

2    This assumes the student repays the loans according to the standard repayment schedule used by most students.