Paying Back Student Loan Debt

Paying Back Student Loan Debt

As the end of the school year rapidly approaches, Moran Law would like to extend our heartfelt congratulations to the class of 2014.

Completing your higher education is a fantastic accomplishment that will bring many new and exciting opportunities. Whether you plan on continuing your education in graduate school or entering the workforce, your newly minted degree will open many doors for you.

However, many recent college graduates find things don’t fall into place for them as they had imagined immediately after graduation.

They don’t instantly find their dream job. They aren’t immediately handed a million dollars. The truth is postgrad isn’t necessarily a glamorous time.

It can be downright terrifying, with high levels of anxiety, fear and uncertainty, especially if you have student loan debt to pay back.

As you start a professional, independent life, it’s important to learn how to budget and keep your finances in order.

Seven in 10 college seniors in the class of 2013 graduated with student loan debt, which averaged $29,400.

After graduating, you have a six-month grace period before you must start making payments on your student loan debt. While this can be a scary thought, it’s important to take a deep breath and stay calm.

Don’t be intimidated. Below we’ve listed three helpful tips to tackling your student loan debt.

1. Contact your loan servicer.

He or she will help you choose the payment plan that fits your needs.

For federal student loan debt, you may choose from a variety of loan payment plans. They differ in the amount of time it will take to pay off your loans and the amount your monthly payments will be in order to accommodate a wide range of different income levels, family sizes and financial situations.

The following options are available:

  • Standard 10-year repayment plan
  • Graduated repayment plan
  • Extended repayment plan
  • Income-based repayment plan
  • Pay as you earn repayment plan
  • Income-contingent repayment plan
  • Income-sensitive repayment plan

Unless you specify otherwise, you are automatically placed on the standard 10-year repayment plan, so it’s important to use your grace period to research payment plans and decide which is best for you.

An excellent resource is the U.S. Department of Education’s Federal Student Aid website, which offers a repayment calculator to help you determine what your monthly payments would be under different repayment plans, an overview of each plan and more.

Preparing in advance will

help alleviate any anxiety.”

2. Make your payments on time.

We can’t stress enough how important it is to make your loan payments on time. If you don’t make your loan payments, you risk going into default.

The first day after you miss a payment, your loan becomes delinquent. Delinquency continues until all necessary payments are made to keep your loan current.

Loan servicers report all delinquencies of 90 days or more to the three major credit reporting bureaus. A negative credit score will impact your ability to borrow money, buy a car or lease a living space.

Your delinquent loan enters default after neglecting to make a payment for 270 days. Default is very serious.

Your loan will be assigned to a collection agency, your credit will be damaged and your debt will increase due to late fees and various additional costs. Your wages may be garnished, and your federal and state taxes can be withheld through a tax offset to collect on your defaulted student loan debt.

You absolutely don’t want your loans to enter delinquency or default. If you’re having trouble making your payments, contact your loan servicer to discuss options.

Planning in advance will help you avoid missing payments because you’re unable to afford them.

You also have the option of signing up for direct debit. Your payments will be automatically withdrawn from your bank account on the due date, so you’ll never miss a payment because you forgot to send a check.

3. Be smart and strategize.

You have the option of directing your payment toward specific loans. It makes sense to prioritize by paying down the largest loans with the highest interest rates first.

By starting with the scariest loans, you’ll be able to wipe out your debt more quickly.

Since interest accumulates daily, another strategy to consider is making additional payments more frequently if you are able. You’ll be able to pay less interest and more of the principal loan amount, which means paying less overall.

Also keep in mind that you are able to make payments on your loans during your grace period. The only thing you accomplish by waiting is increasing the amount of accumulated interest on your loans.

You should feel nothing but confident as you embark on your postgraduate adventures. Preparing in advance will help alleviate any anxiety you have about paying back your student debt. Remember your debt is manageable and you have options.

Congratulations, class of 2014! Oh, the places you’ll go.

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