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5 Things you need to know about your student loans

5 Things you need to know about your student loans

March 22, 2022
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Student loans can be overwhelming and hard to face, however, avoiding them only exacerbates the problem. Repayment strategies are largely time dependent; putting off creating a repayment plan can only increase the total cost to you.

Gathering the key information below about your loans is the first step towards creating your repayment strategy.

Federal Loans:

  • Login at studentaid.gov to retrieve your federal loan records
  • Ensure that you have access to your loan servicer’s online portal

Private Loans:

  • Ensure that you have access to your loan servicer’s online portal
  • Request a copy of your promissory note if you do not yet have one on file 

1. Type of loans, disbursement dates, current balances & interest rates

Direct Loans & Consolidations

Federal Family Education Loan (FFEL)

Direct Stafford

Perkins

Parent PLUS

2. Status of your loan

Repayment: The borrower is currently making payments on their outstanding student loans.

Forbearance: Borrowers are not required to make a payment for up to 12 months. Interest may still be accruing on loans in forbearance and any outstanding interest at the end of forbearance will be capitalized. There are two types of forbearance: mandatory and general. General forbearance may be granted for reasons such as financial difficulties or medical expenses. During this period, the borrower will not make progress towards Public Student Loan Forgiveness or taxable forgiveness.

Deferment: Borrowers are not required to make a payment during this time. Interest may still be accruing on loans in deferment and any outstanding interest at the end of deferment will be capitalized.  A qualifying circumstance is required for deferment, such as being enrolled in school, economic hardship, or unemployment. During this period, the borrower will not make progress towards Public Student Loan Forgiveness or taxable forgiveness.

Delinquency: If a payment is missed on a loan, it automatically enters deliquency until the past-due amount has been paid or placed in forbearance or deferral. 

Default: After a loan is deliquent for 270 days, Direct or FFEL loans will go into default. Other types of loans may have different parameters. Default has a host of nasty consequences including the entire loan becoming due and damaging your credit. During this period, the borrower will not make progress towards Public Student Loan Forgiveness or taxable forgiveness.

Grace Period: The period after the borrower graduates, leaves school, or is enrolled less than half-time. Dependent on the type of loans, the grace period can range from 6-9 months or not be available at all. Borrowers are not required to make payments but will accrue interest on some types of loans. 

3. Current monthly payment for each loan

As arguably the most painful part of have student loans, you most likely know this number already! It’s important to confirm your monthly payment and that you’re paying in full to avoid any late fees or penalties.

Additionally, if you have more than one loan, the amount going towards each loan is pertinent.

4. Your repayment plan

Income Dependent Repayment: Repayment plans for federal loans in which the borrower’s payment is a percentage of their income. The borrower must recertify their income and family size annually by providing the required paperwork and income documentation (usually the most recent tax return). The payment is recalculated each year.

Income Contingent Repayment (ICR)

Income Based Repayment (IBR)

New Income Based Repayment (2014)

Pay As You Earn (PAYE)

Revised Pay As You Earn (REPAYE)

Standard 10 Year: The repayment plan borrowers are automatically placed on. Often, the monthly payment is onerous and the borrower may end up switching to IDR.

Graduated: Payments start lower and are increased every two years for a period of 10 years if it's not a consolidated loan. The payment period for consolidated loans can be between 10-30 years.

Extended: Stretch payments on a loan over a longer period of time (up to 25 years) to achieve a lower monthly payment. 

Extended Graduated: Stretch payments on a loan over a longer period of time (up to 25 years) to achieve a lower monthly payment. Payments start lower and are increased every two years.

5. Date you entered into the repayment plan

This date can project when you will have paid off your loans, when you’re eligible for taxable forgiveness, or how far you've worked towards Public Student Loan Forgiveness. Additionally, if you are in an Income Dependent Repayment plan, it's important to recertify annually on time to avoid capitalization of interest.

What’s your long-term plan to pay them off? Why use a Certified Student Loan Professional?

Navigating the complex world of student loans may seem near impossible but CSLPs are trained to help. CSLPs are accredited by the Certified Student Loan Advisors Institute, who states that:

“Knowledge of student loan programs AND personal financial counseling is critical. One option is to look for advisors who have the CSLP designation (Certified Student Loan Professional). These individuals are typically providing advising services as part of their daily business activities such as financial planning, tax advice, investment services, and insurance.

Using a CSLP can provide an additional measure of safety that the advice you receive is based on advanced knowledge about student loan advising and personal finance. A CSLP will have completed a rigorous curriculum of coursework and should have years of experience as a financial professional, with a commitment to a high set of ethical standards in their practice.”1

People of all ages are burdened by their student loans, hindering their progress towards other goals, such as purchasing a home or retiring comfortably. The development of a repayment strategy gives people confidence and assuages anxiety.

About the Author: Natalie J Trouw, CSLP®

Natalie J Trouw joined Elevation Financial Group in 2017 and is dedicated to helping women and young professionals with their finances. She earned her CSLP® in 2021. She is an avid skier, lover of green chile, and is committed to giving back to the Santa Fe community.

Find a CSLP® in your area 

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Sources:

1. https://cslainstitute.org/student-loan-borrower-resources/

www.studentaid.gov

Photo by Pavel Danilyuk from Pexels