Submitted by New Jersey Bankruptcy Attorney, Lee M. Perlman.
After graduation, student loan management is the last thing you want to think about. If you have landed your first full-time job, the reality of paying back your student loans is right around the corner. If you have been out several years, this is still an opportune time to learn more about your student loans and potentially save money.
Here are some tips to get you ahead and get the most out of your educational investment:
Understand Your Loan Terms
- Review what types of student loans you have. The term for each loan and the interest rate. There are multiple types of student loans such as federal subsidized or unsubsidized loans and private loans. Different loans have different benefits associated with them. Ex: Subsidized loans are great to have if you wish to go back to school, as they do not accrue interest in periods of deferment.
- Find out what type of interest rate you have. Fixed rates will remain the same throughout the loan or is it a variable rate that can fluctuate with the market.
- Find out what term you have on each loan. While you may like low monthly payments, you may not want to keep a loan around for 10 years. Calculate how much you should pay to pay off your loans sooner or even consider consolidating your loans into one balance to make repayment easier.
Take Advantage of Your Grace Period
Most federal student loans and some private loans have a grace period after graduation where the borrower does not need to make any payments. Keep in mind that if you had a break in school attendance before graduation you may have already used some or all of your grace period. During the grace period, you should get all of the details of your student loans and examine what type of repayment options they have available to you. If the standard repayment option is not affordable for you, discuss the different payment options with your student loan lender.
Understand How Student Loans Affect Your Credit
Paying your student loans on time is a great way to establish a strong credit history. Your payment history can strongly affect your future depending on if you pay well or not. Student loans reflect as installment loans with fixed monthly payments on your credit report. Making payments on time attributes to 35% of your FICO score and is the highest weight factor in your credit score.
The payments you make on your student loans can have an impact on future credit applications for an auto loan or even a mortgage. Lenders will factor your student loan payments into your debt to income ratio whether or not your loans are in deferment at the time of your application. Managing your student loans effectively can help you with later life milestones, so it is important to not neglect your student loan payments.
Know Your Repayment Options
There are many repayment options available for students who are struggling to make their payments. Many federal loans often have deferment or forbearance options available to borrowers who need a break in payments due to financial hardship or wish to return to school. Other repayment options include income-driven repayment plans and Pay As You Earn.
Private student loans may offer similar federal benefits, but be sure to contact your servicer to see what benefits you have if you are in financial hardship. You may be surprised to find out payment programs you are eligible for and can take advantage of.
Stay Aware of Market Rates
As you begin repayment on your student loans, knowing how your interest rates compare to market condition could save you a lot of money. As you build up a stronger credit profile and pay your bills on time, you can potentially get a better interest rate on your student loans. Student loan refinancing rates are subject to market conditions so understanding when rates are low can signal the perfect time for a refinance.
It is important to stay proactive with your loans in order to pay back your student loans faster and potentially save money while doing so. Start setting goals now and reduce your student debt burden.
To learn if your student loan interest rates could be lowered, visit Credible.
Originally published here by the Huffington Post.