For many students graduating college, the biggest challenge they face is when and how to begin paying back their college loans. About two-thirds of students borrow money to pay for college, so this is no small issue.
In 2007, the median debt of students who graduate from four-year private colleges is about $20,000, and it is about $16,000 for students graduating from public colleges, according to the College Board. Since 2007, it has only increased with tuition and living expenses spiraling upwards. Today’s students can owe upwards of $50,000 when they graduate from college. Paying off these huge loans will take some time and we have a number of suggestions for them to meet this obligation.
Students graduating with loans to repay are advised to follow these steps:
Due to the way college costs are financed, students typically end up with five to seven loans at graduation. Each loan can be for a different amount and carry a different interest rate. It’s important to take an inventory of all of your loans to know when you must begin repayment. Most loans (federal and private) will be in deferment for the first six months after graduation, which means you do not have to make payments during that time. You will need to know when payments are due, and how much the payment is for each loan.
Also, you’ll want to update your contact information with the lenders (you may have moved to take a job somewhere or just changed addresses in the city you went to school in) and get updated contact information on your loans, since some of your loans may have been sold to another company, which will now collect the payments. This is important, so you will receive important notices and know where to send various monthly payments.
Dealing With Multiple Loans and Interest Rates
Since many students have multiple loans covering the years they attended college, these loans may also be at a variety of interest rates as well. The loans were applied for at various times and in different years. Depending on the timing, the interest rate and even the terms of the loans could be quite different. In addition at the time of graduation or six months after you graduated when payments become due, the prevailing interest rate could be different than what you are paying on your student loans.
If the rates are higher, you probably want to stick with the loans you have and the interest rate that you have. You will pay less interest on your current loans, than if you consolidated all of your loans into one single loan. On the other hand if, interest rates have fallen and are now lower you might be able to consolidate all of your loans into one single loan at a lower interest rate. This can mean that your monthly payment will be lower and the amount of interest you are paying will be lower as well. Seek some guidance from a lender or loans officer at a bank to determine the best course of action.
Don’t Miss Any Payments
Your credit rating is very important. Having a good credit rating will help you obtain loans for things like cars, credit cards and a mortgage in the future if you plan to purchase a home. While this may not in your plans right now, you certainly do not want to ruin your chances for obtaining a low interest loan on a car or some other item that requires a loan to purchase.
Failing to meet your student loan payments because of simple things like forgetting to advise of a change in address, failing to make the monthly payments etc can drastically impact your credit rating. Obtaining or signing up for many credit cards can also lower your credit rating even if you do not use the credit cards. The credit rating agencies treat credit cards as potential high interest loans which can become a serious debt issue in the future.
Manage your debt and your loans carefully to make sure that you maintain an excellent credit rating at all times. Consumers who do this typically do not have any problems in being approved for loans when they wish to purchase a new car, apply for a credit card or even buying a new home and need a mortgage for the home.
Student loans are a wonderful financial instrument that can help many students attain their education, however like all loans they must be managed carefully to ensure that future credit ratings are not damaged in any way.
I hope this helps!