It’s best to approach your student loans proactively and create a way to ensure you can pay off your loan or find some assistance. Here are a few recommendations that can help you deal with federal student loan debt. However, you might be able to apply them to private student loans as well.
Know Your Payment Amount
You can’t possibly develop a realistic budget until you know the amount of money you will be expected to pay monthly. Once you have this information in place, you can compare it against your anticipated income and expenses to determine if you might run into a shortfall. Federal Student Aid (FSA) has a payment calculator you can use to calculate payment amounts under different plan options. If you have private student loans, many of them also offer similar estimators, so you should be able to calculate the total payments you will be making.
Study the Payment Plans
With federal student loans, you can choose your payment plan options, but you have to let your loan servicer know that you will be participating in one of these plans. Otherwise, you will be automatically enrolled in the standard 10-year repayment plan, where the monthly payments might be a little higher than you can afford. Other student loan repayment plans can extend the payment period, gradually step up the amount due, or develop a schedule based on your earning capability. If you choose one of the income-based repayment plans, you will have to keep in touch with your loan servicer regarding your income. You can also choose to have your loan servicer determine which income-based plan is best for you.
Are You Interested in Public Service?
If you plan on going into public service, you should know that the Public Service Loan Forgiveness (PSLF) Program will forgive the remaining balance on your Direct Loans (or loans converted to Direct Loans) after you have made 120 monthly payments while working full-time for a qualifying employer. To help determine if you are meeting the requirements to qualify for this program, you should periodically submit an Employment Certification for Public Service Loan Forgiveness form. After you make 120 qualifying monthly payments, you will need to submit a PSLF application. If you’ve been employed in the public sector and have been making payments on your student loan but didn’t qualify for forgiveness, you might qualify for a limited waiver. The limited waiver is valid through Oct. 31, 2022, for any public sector worker that has consolidated the eligible loans into the Direct Loan Program by that date. The loan type and repayment plan criteria are also waived for this period, as long as you’ve had qualifying employment in public service and have made 120 total payments.
Consider Loan Consolidation
You may have taken out multiple student loans from multiple servicers to fund your education. If so, you might find it difficult to keep track of all the paperwork and payments. It might make sense to consolidate your federal student loans into a single monthly payment. To apply for a Direct Consolidation, you can use the electronic or paper option. The total application process takes about 10 minutes. You may also want to consider consolidating your private student loans into one loan as well.
Can You Make Payments Automatically?
If you have a bank account that you can set up to make automatic payments, you could be eligible to receive a 0.25% interest rate deduction on your federal student loans when you enroll. Ask your loan servicer if this option is available.
