After College: Strategies for Your College Finance Plan

We’ve discussed why students and their families need College Finance Plans (CFPs) and IMG_9739summarized strategies to use in your CFP’s “Before College” and “During College” phases. Let’s review some “After College” strategies.

Almost 70% of college graduates borrow. They leave averaging more than $34,000 in student loan debt. Hence, most strive to keep their initial monthly payments as low as possible. Toward this end:

Ex-students also strive to reduce the overall amount they repay to free up money for other uses. To IMG_9744do this:

  • Prepay: Cut the total interest you repay by prepaying – i.e. paying early or paying extra — whenever possible.
  • Reassess Your Repayment Plan: Annually compare monthly payment amounts under your current plan to such amounts under other repayment plans. Switch plans if you can afford to pay more each month. This’ll create big savings.
  • No Negative Amortization: Some federal repayment plans allow you to pay less than the monthly interest charged on your debt. It’s better than defaulting, but you’ll pay more in the long run.
  • Use Loan Forgiveness: Washington offers some generous forgiveness plans on its loans. Pursue them if you qualify.

Being late or delinquent on your student loan payments generates extra fees and penalties. To avoidIMG_9747 this:

  • Call Your Servicer: Ask to change your repayment plan or due date or to explore repayment deferments and forbearances if you have problems making your whole payment on time.
  • Dispute Servicer Errors: There are steps you can take if your loan servicer causes you repayment or other problems.

It’s your debt. Manage it aggressively to avoid problems and save money.

Look here next Wednesday morning for a more extended review of a strategy for your CFP. Need some personalized guidance on one or more of these strategies. Contact College Affordability Solutions at (512) 366-5354 or collegeafford@gmail.com for a no-charge consultation.

Advertisements

After College: “Late” and “Missed” are 4-Letter Words for Your Student Loans

If you graduated from college last spring after borrowing federal student loans, your loan servicer has already let you know the first of your monthly payment due dates. img_5066Chances are that date is this month.

This date is important. Pay on or before it and you’ll build a positive credit rating. Pay after it’s passed, or make no payment, and you’re immediately a delinquent borrower. Then your loan servicer may report your delinquency to the major credit bureaus right away (they must report it you when you’re 90 days delinquent). You’ll have an adverse credit history that’ll result in higher interest rates if you’re img_5065even able to borrow for a car or house; may stop you from renting an apartment or signing up for a cell phone or utilities; and could even stop you from getting a job.

As soon as you become delinquent, your loan servicer may also add collection costs equal to 18.5% of your debt to what you owe.

Fail to make any payment within 30 days of its due date and you’ll also pay a late fee equalling 6% of what you owe. Miss nine monthly payments in a row and you’re in default — at which point a government-hired collection agency will require you to repay your whole debt immediately. The government may also confiscate up to 15% of your salary and wages, your tax returns, and any money it owes you. It can also get permission from a judge to take real estate and other property you own. Finally, you’ll never be able to borrow another federal student loan while in default.

Fortunately, it’s easy to make your federal student loan payments on time. Enroll in an automatic debit plan and your payment will be deducted from your bank account on the same date every month. You’ll also reduce your interest rate by 0.25%.

If your monthly due date doesn’t work for you, contact your loan servicer and ask to change it. Do the same if you need to change your repayment plan to lower your required monthly month amount.

Need to postpone your payments for a while? You can do this without becoming delinquent. Contact your loan servicer and ask for a deferment or forbearance.

So don’t ever let yourself run late on your monthly payments or, worse yet, miss them altogether. Both produce nasty results, and they’re way too easy to avoid!

College Affordability Solutions has extensive experience with the ins and outs of student loan repayment. Call (512) 366-5354 or email collegeafford@gmail.com if you need confidential advice on managing your college debt.