10 Tips to Manage Your Student Loan

A college education is quite expensive in the US. To help young Americans get a college degree, the federal government and other private institutions offer student loans. You may apply for a federal government student loan or a private loan. Remember that you must pay back the amount you spent. Here are ten tips to Borrow as little as possible to make it easy for you to pay back your debt.

  1. Apply for a minimal amount

Student loans can help you achieve your goal of having a college diploma. However, you have to pay it back with interest once you have a job after graduating. Applying for an amount that is enough for your schooling would help you borrow less, which means you can pay it quickly. You can have a part-time job while you study so that you would have something to spend on your other needs.

  • Make a definite plan

The reason why you take a student loan is to pay for your college education. Plan out on how you would pay for your tuition and other needs. Consider spending what you borrowed on tuition fees, books, and board and lodging while earning extra for your other expenses. Avoid using your loan amount to buy things that are not essential.

  • Create a budget for the future

Most successful people do not spend beyond their budgets. Making both ends meet needs self-discipline. Estimate your monthly income and expenses when you already have a job. Include the amount that you must pay for your student loan so that you would have an idea how much is left after making the deduction.

  • Know the type of your loan

Student loans can be extended by the federal government or by a private entity. Federal government student loans come from the administration. The interest is low, and when you cannot pay immediately after graduation, the government will take care of the annual percentage rate or APR. You can seek loan forgiveness by working for a government or non-government organization.

Borrowing from a private entity could mean more stringent rules. Payment must start on the date specified. Even if you do not have a job yet after graduation, you must pay the charges for your balances

  • Know the people that manage your loan

The federal government assigns student loan servicers. Their services include keeping you updated with information about your loan, answer your questions, and manage your payments. Know your servicer by visiting the National Students Loan Data Systems or NSLDS.

  • Create an online account

An online account will make it easy for you to reach out to your loan servicer if you have questions. That person can give you the latest information regarding your student loan. Make sure to keep your online account always current.

  • Make an early payment

Even if you are still a student, making small payments if you can will help reduce the sum you must allocate for your debt in the future. Every time you earn extra money, set aside an amount for loan payment. Instead of going to the cinema and having coffee in an expensive coffee shop, use the money to make advance payments. After you graduate and start earning, you will realize how your sacrifices can make a difference.

  • Know your repayment options

When you have a student loan from the federal government, you will have several repayment options. You can choose the standard repayment plan where you will have fix payments in 10 years payment. Another option is the graduated payment plan, where you start paying small amounts that gradually increase until you have paid off your loan. If your credit has a balance of more than $30,000, you can take the extended repayment plan.

Other options are the pay as you earn and revised pay as you earn repayment plan, income repayment plan, income-contingent repayment plan, and income-sensitive repayment plan. Since you have several options, you can choose the plan which suits your situation best and income.

  • Repayment is easy if you have a small loan

You can reduce your debt by making small payments while you are still a student. Once you are earning an income, you can pay more every month to shorten the repayment period. You will most likely be debt-free after paying for a few years.

  1. Keep connected

Continue getting in touch with your servicers when you are making payments. You might qualify for reduced interests and other benefits. If your situation changes and you cannot afford to continue paying, let your servicer know immediately.

Consider these tips so that you would never have a hard time repaying your student loan. Always keep in touch with your servicer if you lose your job, or you got sick and cannot pay on time. A student loan must not be a burden you have to carry for years; it must be an instrument that you can use to improve your situation in life.

8 Repayment Plans for Student Federal Loans that You Must Understand

Going to college in the USA has become very easy with the help of federal student loans. Americans that want to get a college degree can apply, and when qualified, the government will finance their studies until they graduate. Since they are getting a loan, they have to repay it but with a low-interest rate and easy repayment plans.

Many students that qualified for the loan have to sign a contract that specifies the repayment plans. In your excitement to go to college, at last, forget to read all the details. If you are not aware yet that you can opt for several ways of paying back your debt, here are the eight repayment plans for federal student loans. At a glance, these repayment options look similar, but by studying them, you can see some differences that make one repayment approach the best for you.

  1. Standard Repayment Plan

All borrowers can avail of the Standard Repayment Plan. If you want to pay off your debt in the shortest time possible, this plan is ideal for you. You will be paying a fixed sum every payment schedule for ten years. However, if you are thinking about applying for public service loan forgiveness, the Standard Repayment Plan may not be the best for you.

  • Graduated Repayment Plan

The Graduated Repayment Plan applies to all borrowers. You can start with small payments, and increase it gradually until you have settled your debt after ten years. A borrower that earns already and foresees regular salary increases can opt for this repayment plan. After ten years of monthly payments, you will be debt-free. For borrowers that plan to seek loan forgiveness through public service, this may not be an excellent repayment option.

  • Extended Repayment Plan

This repayment approach is open to direct loan and Federal Family Education Loan (FFEL). Because of the financial assistance that the government extends will depend on the family’s financial standing, the sum is larger than the regular student loan. Parents can pay the amount borrowed in 25 years. When a family has a balance of $30,000 or more, the extended repayment plan is the right choice. You can pay small amounts until you have settled your debt.

  • Pay As You Earn or PAYE

Borrowers that have received a direct loan and plans to seek public service loan forgiveness can avail of this repayment scheme. Your monthly payment will be 10% of your income for the same period and not more than what you should pay monthly under the standard repayment method. You will have small monthly dues, but because it takes many years to repay the loan, you might pay more interest.

  • Revised Pay As You Earn or REPAYE

This type of repayment option is open to direct loan borrowers. Similar to PAYE, REPAYE requires 10% of monthly income for loan payment. As long as you do not mind the interest rate, you can opt for this type of loan repayment. However, this might not be ideal if you are married and file a tax return for couples.

  • Income-Based Repayment (IBR)

If you have taken loans that the government has subsidized, you can use this approach to pay your debt. You must use 10%-15% of your monthly income for your monthly amortization. If you want to apply for loan forgiveness through public service, you will benefit from using this loan repayment method. For borrowers with high income, this approach to paying a loan may not be beneficial because you will be paying high interest for your overall credit.

  • Income Contingent Repayment Option (ICR)

You can choose this repayment approach if you have a direct loan. The government will require you to pay 20% of your income or an amount that is equivalent to the sum that you will pay for a fixed loan of 12 years, whichever is lower.

However, if you have other debts aside from a direct loan such as a short term loan from a site like Adherents.com this may not be the best for you. The same applies to married couples that file their income tax jointly.

  • Income Sensitive Repayment

Family Federal Education Loan borrowers can opt for this repayment method. Your monthly payment depends on your annual income as long as you can pay off the loan in 15 years. The monthly dues will be much lower than what you must pay under the standard repayment plan or the graduated repayment plan. However, you cannot apply for loan forgiveness under this scheme.

Remember that no repayment plan will fit everyone. Some borrowers might land a high-paying job right after graduation, while others might have low-paying jobs for years. Whatever option you take will depend on your financial situation. If you can afford to pay more, you can opt for the standard scheme. For those who are experiencing financial difficulties, there is always one option that would be beneficial to you.