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How to Tackle Student Loans During the Grace Period

By U.S. News & World Report

Get Ahead of Student Loan Payments

Congratulations — you survived college. But now it’s time to think about those pesky student loans.

Depending on its terms, a loan may allow graduates to delay their first payment for several months. This is when those recent borrowers should settle on a repayment plan, consider consolidation, make a budget and get through other repayment prep work.

Mark Your Calendar

The length of the grace period will vary depending on the loan. Most federal loans have a six-month reprieve, often ending around November. Perkins loans, which are also federal, have a nine-month pause. Private loan borrowers should check with their servicers on the existence and length of any grace period — they might not have one.

Take Stock of Your Loans

New graduates can take this time to verify how much — and which kinds — of debt they have. For federal student loans, head to the National Student Loan Data System, which is the government’s hub for that information.

Borrowers unsure of their private debt can check their credit report to see if any loans appear.

Calculate Interest

For many loans, interest will continue to accrue before the first bill comes due. Two exceptions are federal subsidized and Perkins loans, which have interest covered by Uncle Sam in school and during the grace period.

To complicate things, however, subsidized loans disbursed between July 1, 2012 and June 30, 2014 didn’t include this benefit.

Tamp Down Costs

Graduates better prepare to repay more than they borrowed. Why? Interest.

Get ahead of ballooning loan balances by making interest-only payments during the grace period.

Choose a Repayment Plan

Graduates have to make a tough decision: choosing a repayment plan.

A student loan repayment calculator can help borrowers figure out the relative costs of various plans. Remember that borrowers don’t need to pay anyone to enroll in a repayment plan — it should be free.

Consider Loan Forgiveness

Some repayment plans allow forgiveness after a certain number of payments, including Pay as You Earn, income-based repayment and Public Service Loan Forgiveness.

These typically require borrowers to demonstrate eligibility. PAYE and income-based repayment participants must have a relatively high debt-to-income ratio. Public Service Loan Forgiveness recipients must make 120 on-time payments while working with a qualifying organization.

Seek Relief

Federal borrowers struggling to make payments when their grace period ends can request forbearance or deferment.

Private borrowers can also reach out to their servicer for a rundown of options. But remember that interest may continue to accrue during this period of nonpayment, depending on the loan.

Weigh Consolidation

Consolidation, where various loans are combined under new terms, can make sense, depending on the borrower’s situation. Federal loan consolidation may help simplify repayment. But some loan benefits, such as Perkins loans’ unique forgiveness options, are lost in the process.

With private loans, consolidation can help a borrower score better repayment terms or swap lenders. But consolidating federal into private debt will cause a borrower to lose federal benefits.

Put Payments on Autopilot

Never miss a payment — and possibly earn an 0.25 percentage point interest reduction — by signing up with a servicer’s auto-debit.

Make the Call

Student loan borrowers don’t have to fly blind. Loan servicers, college financial aid offices and the federal government can all help recent graduates understand their options and get on a repayment plan. Just pick up the phone.

Don’t Slack Off After the Grace Period Ends

Once the grace period ends, the repayment fun begins.

Keep up-to-date on student loan repayment tips and advice while steering clear of common myths. And join the conversation by following U.S. News Education on Facebook, Twitter and Google+.

More from U.S. News

4 Steps for Prepaying Student Loans the Smart Way

How Student Loan Repayment Changes After Graduate School

Tipping the Scales on Income-Based Repayment Eligibility

How to Tackle Student Loans During the Grace Period originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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