Managing Student Loans

By Bernard Freeman

The average student loan debt for a new college graduate is nearly $30,000, and chances are, most college students took out some form of loan during their higher education career. Here’s what that means for your life after graduation.

Exit Counseling

You will be required to take exit counseling as part of your college’s graduation procedures; it’s federal law. During exit counseling, you will learn about the types of loans that you have and your options for repayment. You’ll need some information to complete exit counseling — make sure to have names, addresses, emails and phone numbers for your closest living relative, two references who live in the U.S., and your employer or future employer, if you have one. Your school may require you to complete this in person, online or on paper. Check with your office of financial aid for more information on your options.

Making Payments

You will be assigned a federal loan servicer that will handle all of the billing information regarding your student loan. Generally speaking, you will start making payments six months after you graduate. Signing up for automatic debit takes a lot of the work out of paying your student loan bill and some borrowers may get a reduction in their interest rates while participating in automatic debit.

Lowering or Suspending Payments

If you need to lower or suspend your payments for financial hardship, contact your servicer immediately. You have options. An increase in your family size or a decrease in your income makes you immediately eligible for a recalculation in an income-driven repayment plan. You can also apply for a deferment or forbearance that will allow you to stop making payments altogether.

It’s important to note that, during a deferment or forbearance, you will still accrue interest charges. You will be responsible for paying accrued interest and it may impact potential loan forgiveness options. Even if you’ve applied for a forbearance or deferment, you must continue making payments until you’ve been notified by your servicer that your request has been granted.

Delinquency and Default

Your student loans must be repaid. If you’ve missed a payment, immediately contact your loan servicer to discuss options. Your loan becomes delinquent the first day after you miss a student loan payment and it remains delinquent until you repay the past due amount or make other arrangements. If you’re delinquent for 90 days or more, your loan servicer will report the delinquency to the major national credit bureaus and it may affect your credit score.