So Your Loans Are Entering Repayment

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    Time to dust off those loan agreements!  As your grace period nears an end, you need to determine your repayment options and start budgeting for payments.  Here are a few tips to help you.  

1. Get Your Terms in Order.  Make sure you know who your lendors are and to whom you need to make payments. To make sure you have all of your loans accounted for, The U.S. Department of Education’s National Student Loan Data System will tell you about your Federal Loans and who is servicing them.  For private loans, you’ll need to check your records or start hitting the pavement.  All of your loans will likely have different terms, options for repayment, interest rates, and calculations of payment; so you’ll need to figure that out for each loan.  Additionally, once you find your lendors/servicers, you need to update your information – addresses, maiden/married name, phone numbers, etc. Otherwise, you could end up in default on a missed payment as not receiving a bill is not an excuse. 
2. Find Out Your Repayment Options.  Have you consolidated yet?  Are there income based repayment plans or interest-only repayments to make paying more manageable?  Do you qualify for any repayment assistance through your employer (you’d have to check with your HR office)?  There are many different repayment options (more so with federal loans) available.  Calculate what will be most manageable for you and work with your loan servicer or lendor. 
3. Repayment Benefits.  Can you get a discount on your rate for paying electronically?  Can you get credits for making so many consecutive and timely payments?  Are there penalties for paying off your loan early?  Little perks can add up, and if paying the penalty is less than paying the interest over the full term of the loan, it might be worth it. 
4. Avoid Default!  At all costs, you should avoid default.  First, find out if you qualify for a deferment.  A deferment allows you to postpone repayment without interest accruing.  If you don’t qualify for deferment, find out if you can make interest only repayments until you can make a full payment.  Another option is forbearance.  Forbearance allows you to postpone repayment, but your interest accrues, which can grow your outstanding balance exponentially. Obviously, a deferment is better than forbearance for this reason, but forbearance is better than a default.  Don’t wait for a potential default to apply for deferment or forbearance. 
5. Forgiveness and Cancellation.  Are you eligible for a loan forgiveness program? Some public service, military, or even rural jobs apply for payment assistance or eliminate repayments altogether.  In extreme cases, cancellation may be available to completely discharge you from repaying your student debt such as disability.

For more information on loan terms and repayment options, check out Chapter Five of my book Barrister on a Budget.