Your student loans might not have kept you up at night when
you were in college, but everything changes when your first bill arrives and
the reality of how much you owe sets in.
Luckily, as a federal student loan borrower, you have six
repayment plans to choose from to keep your monthly payments affordable. Follow
these three steps to make sure you’re on the plan that makes the most sense for
you.
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Step 1: Understand all your options
Around the time you graduate, you’ll be required to go
through an online exit counseling session on the government’s Federal Student
Aid website. There, you’ll choose a repayment plan, which determines how much
you’ll pay each month to your student loan servicer. The plans you’re eligible
for depend on your total loan balance, the types of loans you took out and, in
some cases, how much you earn. These are your options; click on the links for
more detail:
Standard repayment: Pay a fixed amount of at least $50 a
month over a period of 10 years. If you don’t pick a different plan, the
government will put you on this one by default.
Best for you if: You can afford the monthly payment, you
want to pay off your loans quickly and you’d like to save money on interest.
Income-based repayment (IBR): One of three income-driven
repayment plans available to you if your monthly loan payment on the standard
plan is more than 10% of your discretionary income (or 15% if you took out your
first loans before July 1, 2014). Your payments will be tied to your earnings,
and your remaining loan balance will be forgiven after 20 or 25 years,
depending on when you took out your loans.
Step 2: Consider additional ways to simplify or lower your
loan bill
Sticking with the same repayment plan until your loans are
paid off isn’t your only choice. In some cases, you could have your federal
loans canceled; you could bundle multiple separate loans into one; or you could
refinance them with a private lender to get a lower interest rate. Here’s how.
Loan forgiveness: Graduates working for the government or
qualifying nonprofits can have their federal loans forgiven after 10 years of
payments through Public Service Loan Forgiveness (PSLF). Choose an
income-driven repayment plan while you’re paying off your loans to maximize
your savings under PSLF. Teachers should also look into Teacher Loan
Forgiveness and Perkins loan cancellation, which could dissolve up to 100% of
your Perkins loans when you teach in qualifying communities and subject areas.
Best for you if: You work in public service and are already
on — or are willing to switch to — income-driven repayment.
Consolidation: Federal loan consolidation gives you a single
monthly payment and interest rate, making your loan payments easier to keep
track of. It will also make certain federal loans eligible for repayment under
income-driven plans and PSLF. Your new interest rate will be a weighted average
of your prior loans’ rates, rounded up to the nearest one-eighth of 1%. Your
repayment term will be determined based on your total balance, but it could extend
to a maximum of 30 years.
Best for you if: You want a single monthly payment for study loan but you don’t qualify for
refinancing, or you want to maintain benefits like PSLF specific to federal
loans.
Step 3: Choose a plan that allows you to make all your
payments on time
If any of your loans go unpaid for three months, the
government will report it to the credit bureaus, which will lower your credit
score. That will make it less likely you’ll receive favorable interest rates on
a car loan or mortgage, or that you’ll get approved for an apartment. After
nine months of missed payments, your loans will go into default.
Avoid late or missed payments by setting up automatic debit
with your loan servicer, which will withdraw your payment directly from your
bank account each month. Most servicers give you a discount on your bill for
enrolling. Also, let the company know as soon as you think you’ll have trouble
affording your bill. Don’t ignore your loans if you can’t afford them; opt for
deferment or forbearance, which temporarily postpone your payments, if you lose
your job or experience other financial difficulties.
Source :
https://educationloansinindia.wordpress.com/2016/04/04/pick-the-best-student-loan-repayment-option-in-3-simple-steps/ |
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