Tips for Managing Your Student Loan Debt

1) Be proactive; find out what you owe and who you owe

• Find out what your total debt is, what kind of loans you have, where they are held, and who you pay.
• Check nslds.com to get a list of your student loans and the details of each loan. Keep records and important paperwork in a safe place.

2) Make your payments on time

• Paying on time will help establish good credit.

• Paying on time will decrease the total interest that accrues on your loan.

• Delinquencies and defaults on student loans will lower your credit rating, and defaulted loans are turned over to the federal government for collection.

3) Make your payments affordable

• Shop for the best benefits. Many lenders offer borrower benefit programs that can lower your interest rate or reduce your loan principle. Choose the best program for your situation.
• Choose a repayment plan that works for you.

Standard – Monthly payments are fixed with a payment term up to 30 years. This plan yields the lowest overall interest cost compared to other repayment plans.

Graduated – Monthly payments are initially lower for the first 2-3 years and then gradually increase over the repayment term.

Income Sensitive – The monthly payment amount is adjusted annually based on your income.

But watch out for any monthly payments that are lower than the actual interest that accrues on your loan each month. This will increase your debt to such a level that you may never be able to pay off the principle.

Is Consolidation for you?

Consolidation is the process by which a lender pays off your individual loans and refinances the total balance into a new consolidation loan with a fixed interest rate and one monthly payment. Because the total balance is higher, you will have a longer repayment term and your monthly payments will be lower. In addition, if you consolidate during your 6 month grace period prior to entering repayment, your interest rate will be fixed at the lower grace period rate.

Consolidation Guidelines:

a) You should have more than $10,000 in federal student loans to make it worthwhile.

b) The loans you wish to consolidate must all be under your social security number.

c) Do not consolidate federal student loans with private student loans. If you consolidate your federal loans into a private consolidation loan, you will lose your federal benefits e.g. fixed interest rate, deferments, subsidized interest, etc.

• Have your monthly payments automatically deducted from your bank account. Most lenders offer a .25% or more interest rate discount for choosing the automatic payment method.

4) Make your payments convenient

• Consolidate your loans (if this is the best option for you) so that you have one monthly payment.
• If you do not consolidate, have your lender combine your loan payments on one monthly bill.
• Have your monthly payments automatically deducted from your bank account.

5) Know what you are entitled to

• Some lenders offer you “benefits” that are not unique benefits; they are really just entitlements that all student loan borrowers receive from the federal government. These include:
  • Fixed interest rates
  • No fees
  • No credit checks
  • No prepayment penalties, and
  • Rates that are “0.6% lower if you consolidate while still in school, or in your grace period.”

• Another entitlement on your federal student loans is the right to have a deferment or forbearance on your loan if you meet the federal requirements. Choosing a certain lender will not affect this entitlement.

6) Know what will cause you to lose the benefit the lender offers

• The benefit offering is what many people use to evaluate a consolidation loan. Equally important is knowing what can cause you to lose the benefit.
• Know what the grace period is for a late payment. Some loans do not provide ANY grace for payments. In that situation, a payment due on Saturday has to be processed on Friday or you will be late.
• Look for benefits that become “permanent.” Some benefits will cease if you have one late payment OVER THE LIFE OF THE LOAN.
• Be careful if the automatic withdrawal (referred to as Automatic Clearing House, or ACH) and the benefit are tied together. If you lose the withdrawal option, the benefit goes away, too. There are some very easy ways to lose ACH, such as:
  • The opportunity to sign up for ACH is limited to 30 days from the signing of the application. If the borrower does not follow up with the lender to get ACH WHILE the application is processing, then they can be outside of the sign-up window. ALL benefits are lost before they get their first bill.
  • They are required to sign up to receive their bill via e-mail. In addition, every month they must reply to the e-mail, acknowledging receipt. If they do not, they lose ACH, which causes them to lose their benefits.
  • Returned e-mails, insufficient funds in their checking account and failure to notify the lender of a change of address are additional ways to lose ACH.