Guide to Student Loans That Everyone Should Know

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The following is a guest post by Kevin Watts, the creator of the blog, Graduating from Debt. Enjoy!

I was like millions of recent college graduates in heavy debt with very little hope. With the right attitude and discipline, I took control of my financial picture, and now I can say proudly that I am debt free

Here below are some practical tips that helped me pay off my student loans:

If you have just graduated from college, or you are in the process of repaying student loans, then these practical tips can help you maintain your loan debts under control. By being aware of your financial obligations, you will avoid incurring massive interest costs and extra fees for late payments. Moreover, it will be easier for you to keep all debt payments affordable while securing a good credit rating.

Forget about stressing out on your loan payments, and check out these 5 relevant tips that will help you manage your debts while ensuring your financial stability:

1. Keep track of your loans.

It is important to be completely aware of your lenders, loan balance, and current repayment status for your loans. These relevant pieces of information will give you an idea about your existing options when it comes to loan forgiveness and repayment. If you are uncertain about these details, then the best thing to do is to inquire from your lender.

By doing so, you will learn more about the status of your federal loans. Additionally, you may want to review your most current billing statement, as well as the original documents that you have signed. In case you are unable to locate these documents, you may consult your school for a backup of these records.

2. Determine your loan’s grace period.

You should understand that each loan has its own grace period, which pertains to the waiting time before you can make your initial payment. For Stafford federal loans, the grace period is typically six months, while it is zero months for Perkins federal loans. If you have an existing PLUS loan (federal), then the grace period depends on the date when the loan was issued.

Regardless of the grace period for your student loans, make it a point to pay on time to avoid late charges. Moreover, you should never fail to inform your lender when you have changed your mailing address or contact details since all mails about your loans may be sent to an incorrect address, and this can cause you a huge problem. In fact, ignoring all bills can lead to a default, which can lead to severe and long-term consequences on your financial situation.

3. Choose your preferred loan repayment option.

When you have a federal loan that is already due, the payment will be based on the 10-year standard loan repayment scheme. For some people, the standard plan is barely reasonable, so they consider other repayment options that will be more practical for them. Furthermore, you may want to change the plan entirely when necessary.

While extending the repayment period to up to 10 years may result to more affordable monthly fees, you are likely to pay more interest costs throughout the duration of your loan. Hence, you may choose another option, such as an income-based plan, that will cap the monthly payments at a percentage of your annual income. This repayment program will also forgive any debts that are remaining after the 25 years of loan payments.

However, loan forgiveness may only be available when you have incurred at least 10 years of loan payments, as long as you are employed in a non-profit or public sector. It is also worth mentioning that private loans for students do not qualify for other deferments, forgiveness, forbearance programs, and payment plans available for federal loans.

Nevertheless, private lenders may offer their clients a type of forbearance that comes with a fee. With this in mind, it is best to inquire from your lender, so you can learn more about your repayment options.

4. Reduce your principal.

If you decide to make a payment for your federal student loan, the amount covers any incurred late fees, interest costs, and the principal. When you have the means of paying more than the required monthly fee, you can massively reduce your principal while minimizing the interest costs of your loan.

You may prepare a written request or notification to your lender, so you can make sure that the additional amount is applied immediately to your loan principal.Then, keep all paperwork for your records, and review them to ensure that the overpayment has reflected on your account.

5. Pay off all loans that have the highest amount.

In case you wish to pay off your loans before the due date, then you should consider settling the fees for the one with the most expensive interest rate. You should also begin paying off your private loans followed by your federal loans, since the former have higher rates and do not come with a flexible repayment scheme.

With these practical tips, you can keep your debts in control while making sure that no loan remains unpaid during the designated repayment schedule.

How about you all? What about student loans do you wish that you knew back when you were a student that you have learned “the hard way?”

Did you take advantage of any of the tips mentioned above in this post during your student loan payoff?

Share your experiences by commenting below!

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  1. Great reminders. I am dealing with my wife's mother-of-all-loans med school student loan. I would say #4 is the most important and definitely keep your paper work. As in every other facet, the government has perfected screwing up every possible aspect of the student loan and conveniently misplace things all the time.
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    • graduatingfromdebt says:

      Wow that sounds like a mess. I agree with you. I have a friend who is over 200K in debt after medical school. Luckily, he does have a high salary so depending on how hard he works he pays off his principle then he should pay that debt rather quickly.
      My recent post List of Scholarship Websites

  2. I regret taking grad student loans.. worst decision. I would have rather worked and paid off loans at the same time i was in school. It's just a burden!!

    I rather have credit card or car loans than a student loans …

    Has anyone done a balance transfer on a student loan?

    • graduatingfromdebt says:

      Max I think you learned your lesson. But at least you got a degree. Student loans usually have lower interest rates than car loans and credit cards so it's not the worst debt you can have. I would advise against a balance transfer. Like Dave Ramsey says you are not changing your behavior and in effect just merely avoiding the big picture of paying off your principal as fast as you can
      My recent post List of Scholarship Websites

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