Repaying Student Loans Tips
Read these 22 Repaying Student Loans Tips tips to make your life smarter, better, faster and wiser. Each tip is approved by our Editors and created by expert writers so great we call them Gurus. LifeTips is the place to go when you need to know about Student Loan tips and hundreds of other topics.
The Grace Period Before Repayment Begins
Chase Tip: Be sure you are aware of which loan you have because not all loans give students a grace period. This means you might be required to pay back the student loan interest soon after receiving a loan. Other student loan options like the PLUS Loan do not have a grace period. The student loan interest charged on this loan begins as soon as the money is disbursed. In addition, repayment begins within 60-days of the full loan disbursement.
Volunteering To Reduce Student Loan Debt
After graduating from college, some students are attracted to the idea of spending time volunteering and helping others. What many don't realize is that there is an advantage to doing this especially if you received a Perkins Loan to help pay for your college education. By volunteering to serve in the Peace Corp, you could qualify to have up to 70 percent of your Perkins loan forgiven (every year of service qualifies you for 15 percent off of your loan amount). Another opportunity exists with AmeriCorps, who will require a 12 month commitment and in return will provide $4,725 that can be applied towards your loan. For your service, they will also give you a stipend of $7,400. Finally, Volunteers in Service to America (VISTA) will help students earn $4,725 after serving 1,700 hours with various non-profit groups that participate in activities to help the hungry, impoverished, homeless or illiterate.
Bankruptcy And Loan Repayment
Going into bankruptcy proceedings, many student loan borrowers mistakenly believe that the debt they have accrued to pay for their education can be included and discharged. However, this is a very complicated process and rarely occurs. In order for a student loan to be forgiven during bankruptcy, the court would have to determine that repayment is causing too much of a hardship for the person. In cases where it is decided that the student loan can be discharged in the bankruptcy proceedings, the full amount is forgiven.
Student Loan Interest Tax Benefit
The interest you pay on your student loans can help reduce your annual tax liability. The federal government allows you to deduct up to $2,500 annually of the interest you pay on any student loan debt that your family accumulated to cover college expenses for you, your spouse, or a dependent. The amount you are actually allowed to deduct depends on your income. A single filer with an adjusted gross income under $50,000 can claim the full amount while those with an income to $65,000 can receive a partial deduction. For a couple filing jointly, those amounts are $105,000 for the full deduction and $135,000 for the partial deduction. If you exceed $65,000 as a single filer or $135,000 for joint, you do not qualify for this deduction. Any borrower who paid more than $600 in student loan interest during the year, should receive Form 1098-E from their lender indicating the amount of interest paid.
Student Loan Forbearance
In some cases, borrowers find themselves in dire straights where they are unable to make the payments on their student loans. If a student loan deferment is not an option based on their circumstances, then the lender may be willing to provide a student loan forbearance to reduce or put off the monthly payments for a limited period of time. To consider a loan forbearance, your lender will request documentation that proves you are unable to make your required payments. If a forbearance is granted, your interest will continue to accrue. Depending on your circumstances, the payments will be postponed for up to 12 months. This will be reviewed each year for a maximum of 3 years.
Student Loan Forgiveness
Occasionally, circumstances may put you in a position to have your student loans forgiven. However, this is not a common occurrence and is only allowed when you meet certain criteria. While some students may think that you only have to pay back a student loan if you complete a degree, that is just not the case. If you don't like your school or the program you chose to pursue, you are still liable for any student loan debt that you accrue. You are also in the same boat if you are unable to find a job after graduation. While there may be some options provided by your lender based on your circumstances, you will still be required to make payments on any student loan you received to help you pay for your educational expenses.
Repayment Plans
When repayment begins on federal student loans, there are several options you can choose from depending on your financial situation. The standard repayment plan allows you to pay off your loans in a 10-year period. This is the quickest option that costs you the least amount of interest over the life of the loan. The extended plan allows you to pay off your loan in equal payment over a period of time up to 30 years. This will cost you more in interest, but could make your payments more affordable. Another option is the graduated plan. This repayment option again allows the borrower to make payments over a period up to 30 years; however, the payments start out low and gradually increase over the life of the loan. This option is based on the assumption that the borrower's income will gradually increase during the life of the loan.
Special Loan Forgiveness Programs (Medical, Law School, Other)
Law school and medical school students often accumulate mountains of debt while completing their studies due to the educational costs and the number of years they are in school. To help alleviate some of the burden, a number of organizations and government agencies provide special programs to forgive portions of the student loans for students who participate in programs to help lower income communities are those in remote areas. In addition, a number of private healthcare facilities, hospitals and private law firms may also offer special programs to payoff loan debt when they recruit talented individuals.
The Student Loan Promissory Note
Everyone who receives a student loan is required to sign a promissory note agreeing to the terms of the loan. This document is legally binding and should be kept in a safe place by you. This will explain all of the information regarding your student loan including repayment terms. It also will have information on it regarding the interest rate and options for the future in the event you are unable to make a payment (deferment and forbearance). Don't take the student loan promissory note lightly. It obligates you to repay your student loans.
Student Loan Forgiveness
Chase Tip: One of the few exceptions provided that allow you to have your college loans forgiven occurs if the college or university you are attending goes out of business before you graduate. This is a rare occurrence since the government keeps close tabs on educational institutions that receive federal financial aid funds.
Student Loan Deferment
During the repayment period of your student loan, your financial situation may change. In these instances, the federal government allows you to request a deferment on your student loan payments. This allows you to defer your payments for a set period of time. In addition, interest does not accrue during the deferment period. An exception to this is the unsubsidized Stafford Loan. There are several circumstances that qualify for deferment. Two common reasons to submit a deferment request include enrolling in a qualified higher education program on at least a part-time basis and economic hardship.
The Grace Period Before Repayment Begins
The Federal Stafford or Perkins Loans you are awarded to attend college require no payments until you graduate or reduce your course load to less than a half-time status. When you no longer qualify to have your loan payment deferred you into what is known as the grace period. During this time, the interest for a Perkins Loan and the subsidized Stafford Loan does not accrue and you do not need to make any payments. Any unsubsidized Stafford Loan also does not require you to make any payments, but the interest will accrue and be added to the balance of your student loan unless you make payments. The grace period for Stafford Loans is 6 months while the Perkins Loan has a longer grace period of 9 months.
Managing College Debt
A note of caution for students as you make your way through the college experience: review carefully your financial aid award package each year. You will be surprised at how quickly your student loans can add up. If you have federally funded student loans, once you begin the repayment period you are liable for all of the debts that you accrued to make your college dream a reality. This would be a bad time to fail to meet your financial obligations. Repaying your student loans should be a priority to keep you from destroying your credit history. Failing to repay student loan debt can result in you having judgments placed against you and wage garnishment. Have your wages garnished to repay your student loan obligation, forces you to live on a lower monthly income because you don't have a choice in the matter and neither does your employer.
Death Or Disability Of The Borrower
Your death will cause enough of a burden on your family without the additional worry of having to deal with your student loan payments. The federal government understands this and allows a complete discharge of this debt in the event of your death. In these circumstances, your family should get a copy of your official death certificate and contact your lender to notify them as soon as possible. To make this process easier, keep information regarding your student loans in safe place that will be easily accessible.
In addition, if you find yourself in a situation where you are dealing with a permanent disability, you should contact the servicing agency for your student loans to apply for forgiveness of your debt. Rather than immediately discharging the debt based on medical information provided, full forgiveness will not occur until you have been permanently disabled for three years. You are not required to make payments while waiting for the final decision. During this lengthy process, if you recover, you will once again be responsible for your debt. Other requirements include having no or limited income (below the poverty level) and you are not eligible to receive additional student loans while going through this process.
Teacher Shortage Loan Forgiveness
Many areas of the country are experiencing difficulties finding and retaining qualified teachers for elementary through high school children. This is especially true in communities at or near the poverty level. As an incentive, the federal government has decided to offer special loan forgiveness programs for teachers willing to make a commitment to work in these designated areas. If you have either a Perkins or Stafford Loan and you meet any of the following, you may qualify.
1. Teach full-time in an approved school that serves a low-income population.
2. Work as a special education teacher.
3. Teach in an area designated as high-demand such as math, science, foreign languages, and bi-lingual education. Other disciplines where qualified teachers are in short supply may also qualify.
The amount forgiven is broken up over several years. Having the federal government forgive the maximum amount would require you to work at least five years as a full-time teacher in an approved school. There may be other restrictions as well depending on when you received your loans. You should contact your lender to find out more details if you think you may qualify.
Student Loans
After years and years of college the student loans are piling up! You want to get out of debt and quick. Follow these tips and you will be well on your way to paying off student loans. The faster you get your student loans paid off the less you have to worry about student loan interest rates.
One of the fastest ways for paying off student loans is to try and qualify for loan forgiveness. Depending on your degree you might qualify for the loan forgiveness program. A lot of teachers can qualify for this program as well as individuals that work for government agencies. Checking with your employer or school counselor about this is a good start in getting that debt paid down.
If you have determined you do not qualify for loan forgiveness try and consolidate your student loans. Not only will this help you lower your student loan interest rates but you will be paying off student loans in a shorter amount of time. Most people have loans with multiple lenders. Getting all of your student loans under one lender will not only simplify your life but will help you get the loans paid down quickly.
Making extra payments is a sure way to get your loans paid down. Send in a few extra dollars every month! Every bit helps.
High Student Loan Payment? You Have Options
If you're struggling to make your student loan payment, you have options to consider. A lot of people get out of school with all kinds of hopes and dreams, and then they don't quite get the job they're expecting - so they aren't as prepared to make that student loan payment as they'd hoped to be. Finding yourself in that position isn't fun, but you should know you can refinance student loans in order to get better terms and a lower interest rate.
Consolidating them into one student loan payment makes things easier, and when you refinance student loans you may see a reduction in interest that will really make a different in how much you have to pay back and for how long. You can also consider deferments - which mean you extend the time before you have to start repaying - and you can file for a hardship to lower your payments, too. Those options are usually for people who have very little income, but making your student loan payment on time each time is better, if you can do it. Try to refinance student loans as soon as you see you're having a problem or if interest rates drop a lot, and you'll save yourself a lot of money.
Repayment Plans
Chase Tip: The final repayment option for repayment plans of an education loan is the income contingent plan. Your monthly payments are calculated based on your current income and are set based on a term up to 25 years. If a balance remains at the end of the 25 year term of your education loan, the remaining loan balance is discharged.
Special Loan Forgiveness Programs (Medical, Law School, Other)
Chase Tip: There are a variety of medical student loans, but one in particular helps those in their post-graduate residency as they prepare to enter a private practice. Some of the perks of this medical student loan is the lack of fees: no origination, disbursement or repayment fees. There are also generous grace periods and reductions in interest rates when the medical student starts repaying. Those rates could end up being permanent, which could save the student a lot of money in the end.
Managing College Debt
Chase Tip: If you find yourself in a situation where you are unable to make your monthly student loan payments, before skipping a payment or two, talk to your loan servicing agency about other options. Consolidation of your student loans or changing the repayment plan of your student loan could help. There is also a possibility that you would qualify for a student loan deferment or loan forbearance. No matter what, be honest and upfront with your loan servicing agency will keep you from dealing with the negative side of the credit world and protect your future.
Education For Military Personnel
Military personnel have a number of special options that can help them pay for college or help reduce student loan debt they have accumulated. There are a number of recruitment incentives that are provided that allow a service member and in some cases their families to attend college. Special programs available to military personnel include the Montgomery G.I. Bill, Armed Forces Tuition Assistance, ROTC Scholarships, and college funds through the various branches of the military. If you completed school before joining the military there are also ways that you can get money towards your student loan debts. The Army, Navy and Air Force all offer money that to pay off portions of your loan debt. The overall amount you can receive towards your student loans varies by each branch of the military so ask a recruiting officer for more details.
When Should You Contact Your Loan Servicing Agency?
As a college student, if things change regarding your status in school or contact information, it's a good idea to notify your loan servicing agency. Your college or university will notify them if you leave school, drop below a part-time status or graduate. However, if you transfer to another school and fail to contact them, they may start the grace period and subsequent repayment process on your student loans. Even if they can't find you to send you a billing statement, once the repayment process begins you are obligated to make the payments. By notifying them that you have transferred to another school and providing proof, you can extend your deferment period and avoid any problems.
Your loan servicing agency also needs to know how to contact you after you have begun the repayment period on your student loans. If you move or change your phone number, contact them immediately with correct information. Failure to do this could result in mail being lost or misdirected.
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| Jennifer Mathes, Ph.D. |
