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6-Month Plan to Prepare for Student Loan Repayment

By U.S. News & World Report

Graduating college comes with a number of responsibilities. Many new grads feel a figurative clock ticking on tasks like finding a job or a place to live. But they also face a literal countdown on student loans.

Federal subsidized student loans require repayment six months after graduation. Before finishing school, borrowers must complete exit counseling on loan repayment. Of course, with so much else going on, students often overlook this information or forget it altogether.

[Read about student loan repayment myths that are debunked.]

In case loans haven’t been your top priority, here is a six-month plan — the same as your grace period — of steps you can take to prepare for repayment. No matter when you graduate, you can follow these steps to set yourself up for federal student loan success.

Month 1: Know What You Owe and When It’s Due

For many borrowers, the first step is the hardest: looking at the loan balance. With the grace period, it’s easy to disregard loans until you have to pay them.

Don’t fall into this trap. The sooner you know what you owe, the stronger you’ll feel when repayment starts.

Access the National Student Loan Data System to find your federal student loan totals. NSLDS is the federal government’s central database for student loan records.

Within it, you can learn how much you owe, whether your loans are subsidized or unsubsidized and more. The system will also list your servicer — the company you’ll make payments to. Now is also a smart time to contact the servicer to find out when your first payment will be due.

Month 2: Start Interest-Only Payments

In a perfect world, you would start making payments on your loans as soon as you can. But if you’re not financially ready to do this, consider at least paying off any interest that has accrued on your loans to date.

That interest will be capitalized, or added to your principal balance, when your loans enter repayment. Capitalization means you begin paying interest on top of interest. This not only increases the amount you owe each month but also how much you repay overall.

If you borrowed subsidized loans before July 1, 2012, or after June 30, 2014, they did not accrue interest while you were in school and will not during your grace period. Subsidized loans from July 1, 2012, to June 30, 2014, don’t have that grace period subsidy.

Unsubsidized loans accrue interest from the day they’re disbursed, and you will pay it sooner or later. Sooner is better, if you can.

[Learn how to reduce student loan debt by paying interest early.]

Month 3: Look at Payment Plans

A few months removed from graduation, you’ll hopefully have a job, a place to live and a good sense of your regular income and expenses. If you haven’t already, now is a great time to set up a budget.

As part of that budget, include your student loan payments — even if you’re not paying them yet. This will help you see their impact on your bottom line and any sacrifices you may need to make to accommodate them.

If the numbers won’t work, look into federal student loans’ flexible repayment plans. Eligible borrowers can shrink payments based on their income and family size, among other options. Use the U.S. Department of Education’s Repayment Estimator to model your payments under different plans.

[Discover 10 steps to develop a student loan repayment plan.]

Month 4: Review Forgiveness Programs

Depending on where you work, you may qualify for a loan forgiveness program. The most common is Public Service Loan Forgiveness, which forgives the loan balances of borrowers who make 120 eligible payments while working for 10 years at an approved employer.

If you work for a nonprofit or public sector employer, see if the organization qualifies. If so, use the PSLF Employment Certification Form to track any payments you make while working there. If it doesn’t, check out this extensive loan forgiveness e-book from the Student Loan Ranger’s parent organization, American Student Assistance®, to see if you qualify for a different program.

Month 5: Check Your Mail

At this point, you should have heard from your student loan servicer. If you haven’t — and you didn’t reach out before — contact the servicer now.

Confirm your correct contact information is on file, and check your payment due date and amount. Even if you do not hear from your servicer, you are still responsible for making all your payments on time, including the first one.

Month 6: Enroll in Auto-Pay

After taking the prior five steps, the last step in the final month of the grace period is to pay your bill — though this is actually the hardest for many borrowers.

A smart, easy way to do this is by enrolling in your servicer’s auto-pay program. This will ensure your payments are on time, and your servicer might decrease your interest rate for using this program. Check out your servicer’s website to see if it offers this benefit and to sign up for auto-pay.

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6-Month Plan to Prepare for Student Loan Repayment 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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