By: Tom Melecki
We’ve discussed why students and their families need College Finance Plans (CFPs) and summarized strategies to use in your CFP’s “Before College” and “During College” phases. Let’s review some “After College” strategies.
Almost 70% of college graduates borrow. They leave averaging more than $29,000 in student loan debt. Hence, most strive to keep their initial monthly payments as low as possible. Toward this end:
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Keep and Use Thorough Records: Never discard a single paper or electronic document you ever receive on your student loans — whether it comes from your school, lender, or loan servicer — and use those documents to know what you and those other parties are obligated to do.
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Use Your Grace Period: Make wise use of your federal loan grace period to project monthly payment amounts under various repayment plans. Did you get cash as a graduation gift? Use it to pay down Unsubsidized Loan interest during your grace period.
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Consolidate — Maybe: The government will consolidate all your federal loans into one debt. This could generate lower monthly payments and other benefits. But be careful, consolidation has certain disadvantages, too.
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Don’t Refinance: Avoid refinancing with private lenders because you’ll lose benefits the government provides for your federal student loans.
Ex-students also strive to reduce the overall amount they repay to free up money for other uses.To do this:
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Prepay: Cut the total interest you repay by prepaying – i.e. paying early or paying extra — whenever possible.
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Reassess Your Repayment Plan: Annually compare monthly payment amounts under your current plan to such amounts under other repayment plans. Switch plans if you can afford to pay more each month. This’ll create big savings.
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No Negative Amortization: Some federal repayment plans allow you to pay less than the monthly interest charged on your debt. It’s better than defaulting, but you’ll pay more in the long run.
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Use Loan Forgiveness: Washington offers some generous forgiveness plans on its loans. Pursue them if you qualify.
Being late or delinquent on your student loan payments generates extra fees and penalties. To avoid this:
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Call Your Servicer: Ask to change your repayment plan or due date or to explore repayment deferments and forbearances if you have problems making your whole payment on time.
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Dispute Servicer Errors: There are steps you can take if your loan servicer causes you repayment or other problems.
It’s your debt. Manage it aggressively to avoid problems and save money.
Need some personalized guidance on one or more of these strategies.Contact College Affordability Solutions for a no-charge consultation.
This article originally appeared on www.collegeafford.com
Dr. Tom Melecki is the founder of College Affordability Solutions. He created it in 2015 after retiring from a 39 year career in postsecondary education. His work in college affordability began at The University of Texas Austin (UT), where he served for 10 years in the financial aid office, including as the director of that office during the last seven years of his postsecondary career. collegeafford.com
