Last week we provided advice for newly minted college graduates who need to take account of their student loans and repayment plans. Below, you can find tips for staying on top of your debt over these next few years of repayment.
Tip 1: Don’t Be Late
Paying late can affect a borrower’s credit. As with any other bill or financial responsibility, it is important for graduates to understand the notion that their credit history, including payment details, will influence their future credit options, such as purchasing a house or a car. Everything a borrower does now will play a part in their future borrowing options. If your payments are due each month at a time when every other bill in your life is due and that presents challenges for you, contact your servicer to change your due date! This can be just enough to offer a bit of relief and keep you on the right track when it comes to your credit!
Tip 2: Don’t Ignore Your Loans
Please be sure to open all mail you receive from your servicer(s) and update your contact information with them if you move. It’s important for servicers to be able to reach borrowers to share loan statements and related information on an ongoing basis, either via mail or online updates.
Tip 3: Get Organized and Set Goals
Setting goals is a crucial step toward ensuring successful repayment. Take advantage of grace periods to set your goals. A “grace period” is the stated period of time during which payments on a loan are not required. With federal Stafford loans, for example, borrowers have a six month grace period after they graduate before they enter their repayment period. This is the perfect time to get organized. Track down all the information on your various student loans, both federal and private. Then, create a budget and begin setting aside funds to cover loan repayment obligations. Also consider depositing your expected loan payment into a separate savings account each month during your grace period. This way, when repayment begins, you’ll be accustomed to allocating a certain amount of your budget specifically for loan repayment. You will also have an amount of money (maybe even equal to three or four months of payments!) to provide a nice cushion as you get started.
Tip 4: Consider Automatic Withdrawals
Loan servicers can automatically withdraw your monthly loan payments from your bank account. This reduces the risk of forgetting to make a payment and negatively affecting your credit. Furthermore, many lenders offer a .25% interest rate reduction when making payments by auto-debit, ultimately reducing the overall cost of borrowing.
Don’t forget that your loan servicer is a key partner during the process. Borrowers should always explore the many options that are available to them for making their repayments, as many servicers offer a wide variety of repayment plan choices, deferment options, and forbearance. To pay off your student loans, you must ultimately work closely with your servicer to institute a plan that makes sense for you as a borrower.