Strategies For Paying Back Student Loans

“60 percent of 2007 college graduates had student debt, each taking on an average of $22,700 in loans.” —College Board Report

“Default rates in 2006, jumped to 5.2 percent from 4.6 percent in 2005″ — U.S. Department of Education.

“A new report by the U.S. Department of Education’s own National Center for Education Statistics reveals that student loan defaults are a far larger problem for some groups—particularly students of color and those who leave college with a lot of debt.” — EducationSector

Student loans are often easy to get but sometimes not as easy to pay back for a number of reasons.

Many students graduate from college only to find themselves buried deep in debt with no plan of action for fulfilling financial obligations.

As mentioned in Everything You Need To Know About Student Loans, planning to repay student loan debt should start before you even sign the promissory note.

Just as student borrowers make the commitment to investing time and money in obtaining a college degree, student borrowers must also make a serious commitment to their financial future by proactively managing student loans from the beginning.

8 Strategies For Repaying Student Loans

Strategy #1: Do Your Due Diligence

Not all student loans are the same. Some student loans offer repayment incentives that can be taken advantage of while in school as well as after graduation. There are student loans that will actually pay the loan origination fee, which could mean more money for books and living expenses. Some student loans offer reduced interest rates upon graduation for borrowers that make payments via automatic withdrawal. The repayment incentives vary…With so many differences in student loans, it is imperative that student borrowers thoroughly research loans before ever signing a promissory note.

Strategy #2: Read Your Mail And All Correspondence From Your Lender

Lenders want to work with borrowers. It is of the utmost importance that you keep the lines of communication open between you and your lender. You will most likely receive some sort of mail or correspondence before, during and after graduating from school. Carefully read any and all of the materials you receive. If you have questions, ask. If you cannot meet deadlines call. If you are asked questions or for documentation respond in a timely manner.

Strategy #3: Keep Your Records Organized

Keep a copy of all of your student loan documents and correspondences in a file.
Here is what you should keep:

» Student loan applications, promissory notes, disbursement and disclosure statements, as well as loan transfer notices.

» Correspondences between you and your student loan lender, including your school’s financial aid office.

» Addresses and telephone numbers of your lender.

» Take notes during any telephone communication with your lender noting the name, the date and time of the conversation, as well as a summary of what was discussed.

Keep all your student loan related documents and correspondences even after all education loans have been fully repaid. (Just in case there are any discrepancies, better safe than sorry).

Strategy #4: Attend Any Required Entrance and Exit Sessions

Upon accepting a student loan you may be required to complete student loan counseling sessions to inform you of your rights and responsibilities as a borrower. Be present for these meetings.

Strategy #5: Manage Your Money Responsibly

» Establish a budget while in school and upon graduating to ensure that you don’t borrow more than you need.

» Be frugal in your spending. Explore ways to save money.

» If you have credit cards try to pay the full amount or as close to the full amount due as possible.

» Stick to your budget avoided making purchases that are included in your budget.

» Take advantage of opportunities to supplement your income. A part-time job can result in valuable professional experience as well extra money to cover your overhead expenses.

Strategy #6: Understand The Benefit Of Half-Time Enrollment

By simply maintaining half-time enrollment you will qualify for an in-school deferment which will suspend or postpone your student loan repayment schedule.

Strategy #7: Take Advantage of Tax Savings

Check with your tax advisor to find out if qualify for tax credits and/or deductions. You may be able to reduce the amount of Federal tax you pay. If you are paying interest on a student loan, you may also be able to take a deduction on your Federal tax return for those interest payments. Use your tax refund to pay down your student loan.

Strategy #8: Repayment

» Send your student loan payments when due every month, if and when possible send more than the full monthly payment amount.  Don’t wait to receive a bill, if you keep thorough records you know when payments are due.

» Understand your student loan repayment options and find out about any repayment incentives offered by your student loan lender. Some lenders will allow you to make higher monthly payments to lessen the total cost of your loan. Sometimes lenders will even lessen your initial monthly payments to make it easier for you to pay back your loans.

»Under certain circumstances, the federal government will cancel all or part of an educational loan. Find out if you qualify for a loan forgiveness program.

» Extenuating circumstances may occur at any time that may limit your ability to repay your loan.  Make sure you understand the deferment as well as forbearance policies for your student loan in case you need to use either of these options.

» If you have more than one student loan find out about loan consolidation and repayment options for consolidating.

» Contact your lender immediately if you change your name or address; have questions about billing statements; have problems making your scheduled payment on time; or if you want information on deferment or forbearance.

» Carefully read all the correspondence you receive from your student loan lender and respond promptly if and when a response is necessary.

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