Too many people, including plenty of brand-new college graduates, fall far behind on their student loan payments for no good reason. How many? The Federal Reserve Bank of New York determined that 35 percent of people under 30 who were supposed to be making student loan payments were actually 90 or more days delinquent. One big reason it's happening is the fact that many among the indebted simply aren't sure how many loans they have, how and when to pay them back correctly and how to find and use programs for people who can't afford the full payments. What follows is a basic guide for rookie student-loan debtors.
What you owe
Many students have a few different types of loans and get new ones each year during the rush to get the bursar's approval to register for classes.
So repayment needs to begin with an accounting of every individual loan. Start with whatever is in your files. Then check to see whether you're aware of all of your federal student loans. Borrowers can use the National Student Loan Data System website (nslds.ed.gov/nslds_SA/)to get the details.
One critical piece of information you need: Who is the so-called servicer that will collect your payments each month on behalf of the federal government? You may have more than one, and you'll want to know how to contact them to ask any questions you may have about your payments.
Author Reyna Gobel suggests starting a simple spreadsheet to track every loan. For people who need to track down all of their private loans from nongovernment lenders, she suggests they get copies from annualcreditreport.com of all three of their credit reports. The Institute for College Access and Success publishes an omnibus repayment guide on its site (go to tbtim.es/3nq).
When and to whom
The first payments on your loans may be due at different times. Some federal loans give you a six-month grace period after you graduate while others give you nine months. With private loans, it varies.
Assume that servicers will fail to find you and give you clear repayment instructions before the first payment is due. If you've moved or changed your email address since you took out your first loan and haven't told the servicers about it, be especially vigilant.
Having the servicer pull the monthly payment from your checking account automatically can spare you some effort and risk, but that works only for people with regular sources of income who won't run out of funds.
The normal repayment period for federal student loans is 10 years. But depending on the loan and the balance, you may be able to lower your monthly payments by taking as long as 30 years to pay them off.
There are several ways to do this. One is through something called extended payment (go to tbtim.es/3nr). Loan consolidation (tbtim.es/3ns) is yet another possibility. The big downside to taking more than a decade to pay is that the total interest costs can be much higher. The Student Loan Borrower Assistance Project of the National Consumer Law Center has an extensive guide to loan consolidation on its website (tbtim.es/3nt).
There are several government programs that set payments on federal student loans based on how much money you make. You can see a list of them on the right side of the Department of Education's main income-based repayment web page (tbtim.es/3nu).
To see what your payment might be under the plans, visit its repayment estimator page. Your servicer will determine whether your income is low enough to make you eligible.
The income-driven payments may cause you to spend more on interest over time than you might have otherwise. Under certain circumstances, the federal government may eventually forgive the debt after a number of years as well.
If you're confused or having trouble making payments, talk to your servicer.