6 Things You Should Know About Repaying Student Loans

If you are one of the 44 million students in America contributing to the $1.3 trillion student loan deficit, as I recently was, this article is for you. From someone with experience in financial aid at a major online college, student debt is no joke. The average student currently owes $37,172 in student loan debt, with some students owing hundreds of thousands of dollars. These little-known facts may help you avoid a financial crisis once you achieve that diploma and enter the real world.

  1. Repayment Options

When you stop enrolling in school at least part-time or graduate, you have about 6 months before your lender is going to come calling. They will usually let you know through a letter and on their website what your expected minimum monthly payment will be. If you can’t afford that, there’s an option of setting up an income-based repayment plan. Many institutions might also refinance student loans under the right circumstances. These three options are typically the only ones available.

  1. Deferment  

You can defer your loans if you are unemployed or you re-enter school. However, your loans will continue garnishing interest, even though you don’t have to pay them right away. If you start going back to school, make sure you contact your lender to let them know you are enrolled. You can usually obtain an Enrollment Verification from your school.

  1. Loan Discharge  

You cannot discharge student loans by declaring bankruptcy. Essentially, the only way to discharge your student loan is to become disabled (not worth it) or die (also not worth it). If you get a job with the military, government or in a non-profit organization, they usually have some loan forgiveness programs available. However, you have to work in non-profit for 10 years before your loans are discharged; by that time, you will probably have most of it paid off.

If you discharge your loans for a disability, you cannot obtain a new student loan for 3 years and you won’t be able to discharge future loans for the same disability again.

4. Defaulting  

Hello, it goes without saying: do not do this. Once you finish school, you need to contribute something toward your loans. If you don’t, in 6-12 months you will be in default. It can take at least 6-9 months of consistent payments to get out of default, during which time you cannot obtain new student loans and the government can start garnishing your wages and your tax refund. There is even one incident of a man being arrested for not paying on his student loans, but that’s another story.

  1. Multiple Lenders  

Federal student loans start out regulated by the Department of Education, but they assign loan servicers like Sallie Mae, Fedloan, Navient, etc. They also retain the right to sell your loans to another company and you may have more than one lender. You can check on your loan information through the National Student Loan Data System, or NSLDS, at www.nslds.ed.gov.

  1. Paying Off Your Loan  

This may differ for different lenders, but my lender required that the loan be totally paid with the “pay off loan” option, not by making a payment that reduced the principal to zero. I tried that and spent a month paying interest on a balance of zero, which sure made a whole lot of sense, FEDLOAN!

Pro-tip: Just because your lender isn’t contacting you by every means necessary doesn’t mean you don’t have to make payments. Sometimes they have an old address or are unable to contact you for another reason. It is your responsibility to keep up with your loan payments. Otherwise, you will be up to your ears in interest.

PRO-PRO-TIP: Even if it is only by $1, try to pay more than your minimum payment every month. This will cut down the interest accruing, ultimately making your loan cheaper and speeding up the time it will take you to pay it off.

Student loans are a necessity to obtaining a degree in this day and age. Right now, very few students are getting through college unscathed. When in doubt, call your school and ask them for help if you don’t understand.

Every school has financial aid specialists equipped to assist you through the process. Student loans can be a burden and a hassle, but take a deep breath, they are not the end of the world. If it comes down to it, you can flee the country and leave your debt to the birds! I wouldn’t recommend that though, unless you went for a Doctoral degree in Liberal Arts.

Photo by rawpixel.com on Unsplash


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