You did it! You got the degree, graduated college, and are ready to branch out into your career. Graduation is a time to look forward to your bright future after years of hard work. But it's also worth taking a look back—especially at your student loans. Many college students graduate without really knowing how much they owe, when payments are due, or even who
they owe. How long will these loan payments be in your life? Organizing your student loan debt is a big first step towards your bright future after graduation. Here are six steps you can take to get on top of your student loan debt.
1. Who do you owe?
Are your loans federal or private? This is a good time to figure that out. Most college students have some kind of federal student loan debt. Go to studentloans.gov
and enter your FAFSA information to see what loans you have and to find the government-hired company that services the loan. This will be the company you contact for all future interactions concerning your loan.
If you have private student loans
this can be a little more difficult to track, especially if you weren’t exactly the world’s most organized filer when you were 17 years old. Your loan(s) also could have been sold to a completely different company than you initially used. In these instances, your college admissions office should be able to lend a helping hand. Your alma mater should have a copy of any loan agreements with your records that can tell you who your loan servicer is. Your credit report can also help you determine information about any private loans.
2. How much do you owe?
This is really a two-fold question: What is the amount you initially borrowed and what is the current
amount of principal you owe? If you have been making some payments towards your loan, it is important to find out if these payments went towards the principal of your loan or if they went towards interest. Federal student loan balances are frequently not up to date, so contact the lender directly for the true amount of your loan. Private student loans should be up to date with your most recent statement, but it never hurts to make direct contact if you have any questions about what you owe and what you’ve already paid.
3. What is the interest rate?
Knowing which loans have higher interest rates can help you determine which loans should take priority as you begin repaying your debt. All federal loan interest rates after 2006 are fixed, meaning the rate remains the same over the duration of the loan. Private student loans as well as federal loans taken out prior to 2006 may have variable interest rates. Find out how often the rate changes and if there is a cap on how high the rate can go. If you have an unreasonably high interest rate, it is likely due to a poor credit score when you applied for the loan. Ask us
how to refinance your student loan!
4. What are my payment options?
Your lender should be able to tell you the estimated payoff dates of your loans which can help you establish a payment plan that works for you.
- Federal loan monthly payments will automatically calculate based on a standard 10-year repayment plan. If you cannot afford these payments, there are many income-driven repayment plans that can allow you to make smaller payments more in line with your budget. It's important to understand any special conditions of these plans and how smaller payments may impact your loan balance.
- Private loans are much less flexible when it comes to payment options. Review your loan agreement. Most private loans will spread out payment equally month by month for the duration of the loan. If you are struggling to pay back your private student loans, reach out to your lender to discuss payment alternatives. They would much rather you be making smaller payments than none at all.
Student loans will be part of your financial reality until you pay them off. It can be daunting to think about paying back this debt while you’re still establishing yourself professionally, finding a place to live, and making your mark on the world. Don’t panic! Answering the above questions can help you create a plan of action to pay off your debt and get back to planning for your bright financial future. If ever in doubt, reach out to Veitengruber Law
. We can help you make sense of your loan repayment options.