If you’re spending the dollars on a higher education, you likely have the prospect of student loans hanging over your head. You’re not alone—Forbes.com reports that two thirds of students graduating from American universities today are carrying some amount of debt with them. Even more staggering, the total student loan debt in the United States is estimated at around $1.2 trillion, with the average graduate owing $26,000.
In the flurry of excitement that comes with graduation, job searching and (hopefully!) snagging that first job, it can be easy to put off thinking about loan payback. Consequently, nearly one quarter to one third of borrowers are late or delinquent on their student loans, a misstep that can have a negative impact on a financial future down the line.
When it comes to student loans, it’s beneficial to take the time to understand your personal situation. Every student is different, so be sure to find out who you owe, and how much you have in debt. As you go through that process, there are a few things to keep in mind:
What type of repayment plan will you have? Many loan programs allow you to defer starting the repayment process until you graduate and then have level payments for up to ten years to pay off the loan. Depending on the type of loan you have and your situation, you may be able to extend the term or have variable payments.
What are the terms (repayment and interest rate) of your loan? As you review your loan, be sure to compare the student loan rate with any other borrowing you may have. For example, it may sound nice to pay off your student loan just to get it behind you, but if that means that your credit card balance would grow, it may not make sense.
Would consolidating your loans or refinancing them make sense? Again, you need to review all of the terms of any existing loan with the terms of a potential consolidated loan. Be sure to consider rates, terms and any costs of consolidating or refinancing.
What if you are having trouble making your required payments? Living up to your repayment responsibilities is serious. Missing payments may trigger penalties and ultimately that may be reflected on your credit record. If this is an issue, contact your lender immediately. You may be able to work out an agreement to extend the repayment period or change the terms to ease the problem. Your lender does not want to see the loan go into default and neither do you.
Looking for additional tips for managing your student loans? Click here to read more.