Tips to manage student loans.
1) Be practical and know the details about all your borrowings.
* You must be aware of your total debts, and for this you will have to find out what all loans you have taken up and details about each student loan help in terms of the lender and the payments. You should also know about the total amount of debts that you have to pay.
* The paperwork and the records must be up to date and secured properly. The information on all the student loan help that have been taken up by you is available on the web site www.nslds.com.
2) Handling repayment:
* Making timely payments as per the repayment plan will take your credit ratings in the positive direction.
* Timely payments help you to save on your student loans, as making delayed payments will invite additional interest.
* Defaulting gets you nothing more than bad credit ratings and penalties from the Federal government.
3) Payment affordability:
* When shopping for student loan help, make the extra effort to get the best benefits. Some lenders have the provision of borrower benefit programs under which you can enjoy a lower rate of interest and sometimes reduction in the principal loan amount is also possible. Before taking the loan you must equate it with your current situation.
* Be wise in your choice of the repayment plan, you can choose one of the following as per your convenience:
1) Standard repayment option: under this you will have fixed monthly payments and the term can be extended up to 30 years. This makes a great choice if the overall interest cost is your first prerogative because this plan has the lowest interest costs.
2) Graduated payments: under this repayment option the monthly payments for the initial period of two to three years are low and gradually increase as you move on with the term.
3) Income sensitive repayment plan: under this the monthly payments for your student loans are adjusted on the basis of your annual income.
When choosing a repayment plan, do ensure that the monthly payments are never less than the amount of interest for each month. If it is so, your outstanding balance will keep on rising and you will have to pay much more than the actual amount of the student loan.
4) Making repayment easier with consolidation:
* Consolidation involves taking up a new loan for an amount which is equal to the total of all
the outstanding debts and paying off all the other loans with this amount so that finally you are responsible only for this new loan. Consolidation loans come on a fixed rate of interest and are beneficial because they replace multiple monthly payments by a single monthly payment. During consolidation the student can take the new loan for a longer term to bring down his monthly payments, and in some cases the reduction in the monthly payments can be even up to 50 percent. Consolidating during the six month grace period has the added advantage of locking in the lowest interest rates during the grace period.
* Consolidation gives you the advantage of a single monthly payment, but if you do not plan to consolidate and all your loans are from a single lender you can ask him to give you a single monthly bill which can make it convenient for you to handle all your student loans.
* Allowing the lender to deduct the monthly payments from the students saving or checking account can be done by signing up for an Automatic debit option. An automatic debit option will not only ensure timely monthly payments and convenience for the student, but also some lenders give you a discount on the interest rate when you sign up for this option.
* The consolidation of your student loans takes place under your social security number. Whenever you consolidate your student loans, try not to consolidate the Federal student loans along with the private student loans for the reason that you will lose out on the benefits which are applicable only for Federal student loans.
* Consolidation is beneficial only if the student has more than $10,000.00 as the outstanding balance of his total Federal loans.
5) Understanding what you are allowed:
* There are some benefits which are common for all Federal government guaranteed student loans, and don*t let the lender fool you that he is giving you some unique benefits. Here are some of the common benefits:
1. Fixed rate of interest
2. There is no application or processing fees
3. Credit checks are not required for student loans
4. There is no prepayment penalties associated with these loans
5. The interest rates are half a percent lower when consolidation is carried out during school or within the grace period.
* The other privileges that you can enjoy on your Federal student loan are:
1. Deferment of monthly payments
2. Forbearance of loan amount.
All the benefits available for Federal student loans do not change with your choice of the lender.
6) Rules you must observe to maintain the benefits:
* Consolidation must be carried out only after you have evaluated how consolidation will affect the benefits that you currently enjoy on your student loan help. Sometimes consolidation may mean losing some of the benefits.
* Some benefits are related to timely payments, and making even a single late payment can take away all the benefits for the entire term of the loan.
* Some benefits are associated with the automatic debit option, and if you withdraw this option you will lose all the benefits.
Lastly, if you follow all these rules you surely would not face any problems with your student loans.
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