What you need to know
As you near your graduation date, you’ll likely be required to attend Exit Counseling with your Financial Aid office. While that session will undoubtedly be worthwhile, you probably don’t want to wait that long before you start thinking about how paying down this debt will affect you going forward.
Here are a few items we would suggest you think about sooner rather than later:
- Whether to consolidate: while loan consolidation can streamline your loan repayment, potentially resulting in significant time savings, and could lock in a lower interest rate, it can have its downside as well. Consolidating could extend your loan term such that you end up paying more overall in the long run; it can also mean you sacrifice certain loan forgiveness options. Make sure you understand the terms of each of your outstanding loans before you consider consolidating.
- Learn repayment terms: don’t consider just each loan’s interest rate, but also what other terms apply. For instance, how does each loan respond to overpayment? (A few will actually penalize you!) What kind of benefit can you get from having a perfect repayment record? These are all details you will want to hammer down as you start thinking about your repayment plans.
- Leverage repayment calculators: as you sit down with the details of each of those loans, start running repayment scenarios. You’ll want to pay more than the minimum each month – but how best to distribute the extra funds? Make sure you consider all possible scenarios, and that you are putting the maximum amount possible toward this repayment.
- Set up a spreadsheet: in addition to using that spreadsheet to run those repayment scenarios, keep leveraging it once you actually start making payments. Lenders can and do make mistakes – be sure to track each payment to ensure that it is accurately recorded.
What options are available?
- Check out alternative programs: several businesses have arisen in recent years seeking to tap into the student loan market, and may offer better rates than you are currently paying. Consider alternative options such as CommonBond (which connects students with investors) and SoFi (which seeks to offer more significant counseling services alongside refinancing, such as career services and entrepreneurship support).
- If something goes wrong: if you find yourself in a situation where your scheduled monthly payment seems untenable (say your start date gets pushed back indefinitely – unlikely, but it has happened!), remember that your lenders will be willing to work with you. They can help you negotiate a lower monthly payment (though that will almost certainly mean higher interest rates) or, in really extreme circumstances, extend you a deferment. Don’t wait – ask for help early if you end up in that situation.
Tips to ease repayment
- Start making payments now: if you have the means to start repaying some of your loans now, it can only help you going forward. Throw a few bucks towards those high-interest loans, and you’ll have a little more wiggle room at the end of the loan’s lifetime.
- Consider automatic deductions: beyond the reassurance that you’ll never miss a payment, auto deductions sometimes carry benefits of their own, including reduced interest rates and lower fees.
- Look into biweekly payments: if this is an option for any of your loan groups, it could save you significant money over the long run, as this strategy allows less interest to accumulate between payments.