November 21, 2014 | By RGR Marketing Blog

Recent Grads Are Just About Ready to Start Paying Back Loans

For college students who graduated at some point in June of 2014, the six-month grace period after which student loan debt repayment must begin is rapidly closing in. With the levels of student loan debt hovering around an average of $30,000 and some students facing much higher debt levels, this can certainly be a very stressful time.

Too many students fail to make their first payment, which can lead to costly fees, and the development of bad habits when it comes to paying back debt. Missed payments, late payments, damage to one’s credit report, and a general lack of concern can end up spiraling downward into former students defaulting on their student loans, and ruining their personal credit. But this doesn’t need to be the case. In order to avoid this financial catastrophe, there are a few steps that recent grads can take to prepare themselves for beginning to pay off their student loan debt.

1) Preparing to Deal With Student Loan Debt: What Do You Owe?

The first step to managing student loan debt should be pretty clear – and that is, to stay on top of the information that pertains to your loan, at a very basic level. How much do you owe in student loan debt? How many loans did you take out to get through school? Have you considered consolidating those loans into one simple, easy-to-remember payment?

Knowing the basics such as which loans are privately held and which are held by the federal government is essential. Here is a brief list of some federal student loans:

+ Stafford

+ Perkins

+ PLUS

+ Direct

+ Federal Family Education Loan or FFEL

+ Grad PLUS

For complete information on exactly who holds your federal student loan debt, you can check the National Student Loan Data System. For information pertaining to privately held student loan debt, which is typically issued by a bank or credit union, recent grads can pull a standard credit report to uncover the details.

2) Keep Your Personal Information Current With Lenders

In order to avoid accidentally missing payments or defaulting on your loan, always keep this on your to-do list whenever you relocate from one address to another: remember to update your current address with whomever holds your student loan debt. When student loan updates are mailed out, you’ll get them. Should you fall behind a few days with a monthly payment, which in many cases will auto-generate a reminder letter from the lender, that notice will end up in the right mailbox. So many former students fail to update their mailing address, and never get the memo that could have prevented missed payments ending up on their credit reports. Don't let this happen to you.

3) Take a Long Look at Student Loan Consolidation

By consolidating your student loan debt, you can accomplish three very important things. First, the total number of student loans that you are carrying will be narrowed down to a single payment. This is key for many people, as managing several loan payments is a headache, and leaves extra room for missed payments and the negative consequences that follow. Second, the amount of interest that you are paying on your student loan debt can be lowered. By locking in one rate for the life of the loan, you avoid paying back several loans at various interest rates.

And third, consolidation student loan debt provides you with the option of extending the life of the loan, thereby reducing the amount of your monthly payments. Instead of opting for a ten-year payback period, you can extend that to as much as thirty years. Though you will pay more in interest over the life of the loan, your monthly payments will be much more manageable, which is very helpful when you’re just starting out in your career.

If you are concerned about consolidation, and are looking for more information, there are several quality resources online to help you out.

4) Get Help When You Have Concerns or Problems

There are several resources available when you run into trouble with student loans, whether you have questions or you’ve hit some financial hardship in life and need to reduce your payments or put your payments temporarily on hold. Start by directly contacting the lender, and discussing your situation with a representative who may be able to offer solutions. For assistance with federal student loans, you can call the Federal Student Aid Ombudsman Group and ask for help. Before you make that call, be sure to get prepared in advance in order to maximize the value of the assistance they offer. Concerns or complaints pertaining to private loans can be directed at the Consumer Financial Protection Bureau.

5) Make Your Student Loan Debt Payments Count

If you’re in a position to pay off your student loan debt more aggressively, be careful. Weigh the pros and cons of paying off student loan debt this way, as you may find that a conservative savings account is a better place to lock up some extra cash each month. The federal government limits the total amount of student loan debt interest that can be written off on your taxes each year, so the extra payments you could make each month might not benefit you as much as you think – remember, once you’ve sent that payment in, the cash is gone forever.

[Photo Credit: BWBX]

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