At least one a week a college senior comes to my office to ask me “How many student loans do I have?”
My initial answer before helping them? “To be honest, this is your responsibility to know how many, how much, and with whom your student loans are.”
I will freely admit that our current student loan system is confusing. A student could potentially get four different types of student loans each semester, with all four of those being paid back to different places. With varying dollar amounts, different lenders, and different repayment terms for each loan, I am not surprised that so many college seniors struggle to begin repayment, and to manage their student loan debt repayment over the years.
Where To Start
The student loan repayment process starts before you graduate. Your college or university is required by law to notify you of your need to complete exit loan counseling. If you have taken out a Federal Direct Stafford Loan or a Federal Perkins Loan, you will receive this notification.
This exit counseling session will walk you through the repayment process, gather your contact information, show you the exact balances of your loans, help you create a monthly budget, and show you when your expected repayment start date is after your grace period. This is an excellent resource, and one that should never be overlooked. But it's online typically – so for many students or graduates, it's all about what you make of it.
That takes care of two different types of loans, but what about the other two? Parent PLUS Loans, and private student loans are the other types of loans and they are often the easiest to repay. Especially the private student loans.
One reason for this is that repayment often begins immediately after disbursement. So the loan payments are not differed for years until after your graduate when you have had ample time to completely forget you ever had the loan. You begin paying back right away. Also, private lenders are MUCH better at following up on their loans and ensuring that you begin paying them back. This is an example where the private sector far outweighs the public sector.
Resources For Your Student Loans
For all federal student loans, including Stafford Loans, Perkins Loans, and Parent PLUS loans, you can access your complete federal loan history at the National Student Loan Data System or http://nslds.gov.
This website keeps a database of all of your loans that are disbursed, as it is updated by the schools that you attend. They send updates each semester to this database so it is often an excellent resource for students and parents.
The Department of Education has been moving many of it's resources to change repayment plans, consolidate loans, and more to StudentLoans.gov. While the National Student Loan Data System is great for looking at your balance and history, StudentLoans.gov is where you can DIY your student loan repayment plan.
The other option is to check your free credit report. This will give you information about any loans that are currently in repayment and being reported to a credit bureau. If you are late on any of these loans, this is the best place to identify the issue and work to correct it. You can check your credit report for free at AnnualCreditReport.com.
Options For Private Student Loans
If you're working with a private student loan lender, you have less options when it comes to programs and services. Typically what you will have to do is change lenders through a process called student loan refinancing.
Student loan refinancing is when you take out a new loan to replace your other student loans. This can be hugely beneficial, because you might get a lower interest rate or longer loan term – both of which could lower your monthly payment.
If you're thinking about student loan refinancing, check out Credible. They are a student loan comparison tool that will give you multiple options in 2 minutes, with no credit check. We are partners with Credible and highly recommend them. Check out Credible here.
Should I Consolidate?
With so many different lenders, interest rates, payment due dates, and payment systems, student loan consolidation is an incredibly attractive option. I would recommend that for most people, the good in consolidating far outweighs the bad. If you are behind on your loan payments or if you cannot keep track of each loan that you have to repay, the simplicity of a loan consolidation would be your best course of action.
However, you do lose a number of benefits when you consolidate a loan. Namely, you lose most of your options for a deferment or a forbearance. So if you enroll back in school, or if you suffer an economic hardship, most consolidated loans still must be repaid. Also, the interest rates are all based on your credit score, so if this is not the best, then you may pay a higher interest rate than you would have with your initial loans.
However, a slightly higher interest rate is much less damaging than a defaulted student loan or multiple loans showing 60 days past due on your credit report. You can also use a loan consolidation to get your loan out of a collection agency if you find yourself there.
It's not an easy decision, but one that is often the lesser of two evils.
Final Thoughts On How To Manage Student Loan Repayment
Finally, we recommend two last tools that everyone needs to manage their personal finances: Personal Capital and Credit Karma. These tools are especially important for student loan borrowers.
Personal Capital is a free money management app that allows you to track your finances. This is essential for everyone because you should always know how much money you have, where it's located, and know where you're spending. If you're trying to manage student loan debt repayment, you have to have this app.
Next is Credit Karma. This app tracks your credit score and your credit history. Since student loans impact your credit score, it's great to track your loan payments and credit history. You want to ensure you're watching your score, avoiding late payments, and taking advantage of their tips and tricks. Oh, and it's free as well.
Do you have any tricks to managing your student loan repayment?