Those three words, “student loan payment,” are enough to send a chill up someone’s spine. Before you get started worrying about repaying your student loans, here are some steps to get you started and make sure that you are getting the most out of your loan.
Compare monthly payments
You can choose a different repayment plan. The amount you pay back each month depends on this plan. However, if you don’t choose a tailored plan, you are automatically enrolled in the 10-Year Standard Repayment Plan. If the 10-year plan doesn’t work for you, you can consider switching your plan to an income0driven repayment plan. If you don’t make a lot of money, your payment could be as low as $0 a month. Keep in mind, if you get your payment amount lowered, you are more likely to pay a higher total amount over time, compared to paying it off within the 10-year span.
Should you consolidate?
Now federal student loans are consolidated for you. However, if you took out loans prior to 2011, you may need to consolidate your loans for repayment. You must consolidate before you qualify for any income-driven repayment plans or student loan forgiveness programs. You may also want to consolidate the loans to make it easier to pay. You will only have one payment a month, versus multiple payments to the different lenders.
Choose and affordable plan
Once you’ve consolidated your loans, you then need to choose a repayment plan. If you would like to choose an income-driven repayment plan, you can do so after you’ve consolidated. According to HomeRoom, the Pay As You Earn Plan is the best repayment plan around. However, if you’re not eligible for that type of repayment plan, your servicer will give you the next-best repayment plan.
Set up your payments
When paying student loans, you pay the U.S. Department of Education through a servicer. Your loan servicer will contact you when it is time to make payments (usually six months after you graduate). If you want to simplify the loan repayment process, you can enroll in an automatic payment program. The money will come out of your bank account monthly. Many servicers will give you 0.25% interest rate reduction when you enroll in automatic payments.
Know who to talk to
If you need help where your loans are concerned, you need to know who to contact. Never try to contact the Department of Education directly. You likely won’t be able to get through and they will not be able to give you any information regarding your loan. You need to contact your loan servicer. For instance, my current student loan payments are handled through Navient. If I have a problem with the amount I am paying, I call the company and they sort it out for me. Remember that a government servicer will never ask for application fees or maintenance fees. If you are asked to pay, walk away from the conversation – they are likely not the real deal.
Photo: Flickr: frankieleon