For most people, student loans represent their first
encounter with the world of credit and finance. They can open a world of
opportunity to young people who might otherwise not be able to pay to continue
their education. More than 60% of American students (that’s almost 12 million
in total) will borrow money annually to help pay for college. It’s likely that
this is where you’ll begin to build your credit score: a little number with
huge consequences. It can be intimidating, but there’s really no reason to
stress out. Staying in control of your student debt is easier than it sounds.
When dealing with loans, you should
Know the nitty-gritty
details of your loans and your lenders
Ignorance is not bliss when it comes to dealing with
educational loans. The first and most important step to staying on top of your
loans is getting up close and personal with all the details. Not all student
loans are created equal, and students may use a combination of different types
of federal and private loans to make up their financial package. Each type of
loan carries its own terms, and you should be familiar with the specifics of
every loan you take out. Make sure that you know exactly how much you owe, what
your interest rates are, and what minimum monthly payment you’ll be expected to
make. Many loans come with grace periods, which are amounts of time after
graduation you can wait before beginning repayment. Grace periods can vary
greatly between loans, so it’s vital that you keep an eye on what will need to
be paid when. Keep careful record of the contact information for all of your
lenders (loans are often sold between institutions, so they are subject to
change), and keep in touch with them. If you find yourself unable to make the
monthly payments, they should be your first call. There are many options out
there to deal with repayment issues, but if you don’t let them know what’s happening,
they can’t help. It’s common to move around a lot during and after college, so
be sure to update your lenders on any changes in address to avoid missing
statements.
Be strategic about your
repayment plan
Deciding when and what to pay can make a real difference when
figuring out your student loan repayment plan.
If you can manage it, pay off the highest-interest loans first, regardless of
their grace periods. This is actually a great financial tip for all kinds of
debt. Subsidized federal loans don’t accrue interest while you’re in school,
but most other loans will. If you can budget to pay even just the accruing
interest while you’re in school and through your grace period, you’ll make a
real dent in the final figures. If you can make payments on the principal, this
is even better. Many lenders will allow you to pay early without penalty, and
chipping away at the main loan is the most effective way to get out of debt
early. After school, if you’re struggling to make payments, deferment or
forbearance are options, and certainly better than just missing payments or
defaulting. But remember that both of these options may increase what you pay
over the term of the loan, because interest continues to accrue each day. They
should be considered a last resort, and you should fight hard to resume
payments as quickly as you can.
Sign up for automatic debit
If you miss a payment on your student loan, you’re looking at late
fees and adding to the amount of interest that accrues. You don’t want to add
to the amount you have to pay, so you should do everything in your power to
minimize the chances of paying late or skipping a payment altogether. Setting
up an automatic payment may be a great first step. This may simplify things for
you, and you might even be able to take advantage of other benefits. Some
lenders offer special deals to borrowers who can consistently make their
payments on time. By signing up for automatic payments, you may be able to
qualify for reductions in your interest rate or principal, which can save you a
lot of money in the long run.
The truth is, borrowing money for college is a fact of life for
many people, and with a bit of education (see what we did there?) it’s totally
possible to take the fear out of the equation and use your Educational Loans to
build a solid financial future for yourself.
Source : https://blog.creditkarma.com/debt/loans/how-to-stay-on-top-of-your-student-loans/
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