S is for Student Loans and Paying Them Back.

 

S is for Student Loans

Congratulations! You have your degree and hopefully a job in your chosen career. This can be both an exciting and stressful time in your life. You are now an adult working full time and paying your own expenses.

Do not forget your student loans – six months after you graduate or stop taking classes your federal loans start coming due. Failure to pay your federal student loan on time is very costly. You will be charged late fees and if left unpaid for too long, collection fees. If you get to this point it may lower your credit scores to the point of exclusion when applying for credit cards, car loans, mortgage, etc.

Start the process by locating all your loans both federal and private. On the National Student Loan Data System you can find your federal loans along with the debt totals and accumulated interest. Your Federal loans will issue the standard 10-year repayment plan automatically. However, here are some other options available to you:

Income-based repayment plan — This plan is based on what you earn. It may make it easier for low-income earners to afford their loans. Keep in mind you will now lengthen the loan period; thereby increasing the interest paid on this loan.

Graduated repayment plan — This plan starts out with low payments and then raises them by about $50 every two years so that you pay off the loan in 10 years. This plan works well for students who are certain their income will increase rapidly after graduation.

Extended payment plan — This plan allows you to make smaller monthly payments and also allows you to extend your loan to as many as 25 years. It may also cause you to pay almost twice the amount of your original loan. This plan should be considered if no other option can meet your needs.

Paying down the loan — If you can afford to pay down the loan ahead of time without jeopardizing your  retirement plan or using your emergency fund, this will always help you pay less interest on the loan.

If you have private loans, contact your loan servicer without delay. Having a successful repayment plan for your student loan debt is vital and will help you to navigate your financial future.

Answers from AZ  

 

About Ann Zuraw

Ann Zuraw, the voice behind "Chicks, Chat and Change", is a Certified Financial Planner (CFP®), Chartered Financial Analyst (CFA®), and Certified Divorce Financial Analyst (CDFA™). If you have comments on this post contact Ann Zuraw

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