Graduating? Five tips to manage your student loans

Our thanks to Heather Jarvis for this post. Heather is a former capital defense attorney and long-time public service advocate who provides free tools and information for student loan borrowers and the people who love them.

Congratulations to the Class of 2012! It’s time to get a grip on those student loans you’ve been pushing to the back of your mind. Update your contact information with your lender, read every piece of mail you get about your loans so that you can figure out a plan that works for you, and check out my five top suggestions.

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It's a lot to think about, but you can do it! (Photo: Scot Campbell, Flickr/Creative Commons)

1. Pull together a list of your loans and see what you’ve got.

Your options will depend on what kind of loans you have so the first step is getting a clear idea of what you owe. Use the National Student Loan Data System (NSLDS) to learn your balance, your loan “servicer”, and your “repayment status”. Private student loans won’t be listed on NSLDS, but you should be able to find them on your credit report.

2. Figure out when your first payment will be due.

Federal Stafford loans have a six month grace period before your first payment is due. The grace period for federal Perkins loans is nine months. The grace periods for federal PLUS loans and private student loans vary and will be listed on your paperwork or you can contact your lender for that information. Know when your first payment is due.

3. Decide whether to consolidate your student loans.

A consolidation loan combines multiple loans into one. You can consolidate your federal student loans through the Direct Loan program, but NEVER consolidate federal loans into a private student loan. You’ll lose the flexible repayment options and borrower benefits like loan forgiveness programs.

Consolidation typically makes sense when:

  • You want to earn Public Service Loan Forgiveness but some of your federal loans are FFEL loans (only Federal Direct Loans are eligible for Public Service Loan Forgiveness). Find out if you have FFEL loans using the National Student Loan Data System.
  • You have variable rate Stafford loans (from 2006 or earlier). Interest rates adjust on July 1, 2012.

4. Determine which repayment plan is best for you.

Federal loan payments will automatically be based on a standard 10-year repayment plan unless you choose a different option. If payments under a standard 10-year repayment term are not affordable for you, find out about your other options.

Income-Based Repayment caps your monthly payments at a reasonable percentage of your income each year, and forgives any debt remaining after 25 years of affordable payments, or after just 10 years of these payments for borrowers who work in public service. Beware of relying on forbearance to postpone your student loan payments. Interest continues to accrue on student loans during forbearance, and many borrowers should consider Income-Based Repayment instead.

Private loans are a different story. Read all the paperwork carefully and ask your lender about your repayment options. They vary between private loans.

5. Learn more about how to handle your student loans.

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Could you benefit from Obama’s student loan programs?

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Got debt? New initiatives from the White House might help you out. (Photo: Serge Melki, Flickr/Creative Commons)

Student loan expert Heather Jarvis writes:

On October 25, the Obama administration announced executive orders designed to assist struggling student loan borrowers. The President announced two new student loan initiatives:

  • Pay As You Earn, making the Income-Based Repayment plan more generous for certain borrowers by fast-tracking improvements to the way payments are calculated and reducing the time it takes to earn forgiveness, and
  • “Special” Consolidation Loans providing a modest interest rate reduction for student loan borrowers who have a specific combination of student loans.

If you’re wondering how these new initiatives might apply to you, read all the nitty-gritty details on Heather’s blog.

p.s. Want to meet Heather Jarvis and ask her your questions in person? She’ll be at our Idealist Grad Fair in Chapel Hill, NC this Saturday. Please spread the word if you’re in the Triangle!

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Consolidate student debt for Public Service Loan Forgiveness

Last month our guest blogger Heather Jarvis wrote about what the debt ceiling deal means for student loans. Now she’s back with more advice for student loan borrowers and the people who love them. Here are excerpts from her post The Scoop on Student Loan Consolidation at AskHeatherJarvis.com.

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"College Tuition Guy." Photo: Joselito Tagalau (Flickr/Creative Commons)

Q. Why would I consolidate my student loans?

Heads up, government and nonprofit workers: consolidation can get your federal loans into Federal Direct, and only Federal Direct loans are eligible for Public Service Loan Forgiveness [PDF]. Consolidation allows you to group your loans together with one lender, and can give you access to a longer repayment period and lower monthly payments.

Bear in mind that the longer it takes you to pay off your debt, the more interest you will pay over time, and extended repayment isn’t necessarily the best repayment plan.  I encourage borrowers with relatively high student debt-to-income ratios to consider the advantages of the Income-Based Repayment plan (like the interest subsidy and forgiveness provisions).

Q. Which loans can I consolidate?

Under the Direct Loan Consolidation Program, you can consolidate just about every type of federal student loan (including Subsidized and Unsubsidized Stafford Loans, PLUS Loans, and Perkins Loans). But I cover three major caveats on my blog – check it out here.

Q. How do I consolidate?

Get all your ducks in a row:

Need more info? Read the full Scoop on Student Loan Consolidation on Heather’s blog for more about interest rates and when to consolidate.

Are there other topics you’d like Heather to cover? Leave a comment and let us know!

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Three financial aid resources for people in public service

By Amy Potthast.

If you are in a public service career and carrying—or considering—student debt, your life just got a little easier.

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You'll make it through these piles! (Photo from troismarteaux on Flickr/Creative Commons

Here are three resources to help you navigate your repayment options:

1. AskHeatherJarvis.com

Heather Jarvis is a national expert on public service loan forgiveness who contributed to student debt relief policy for the House Education Committee and others in Congress. Her new site is a clearinghouse of information about managing your debt while working in a mission-based career.

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2. IBRinfo.org

IBRinfo is an independent information hub about income-based student loan repayment and public service loan forgiveness – two relatively new federal programs that help student borrowers afford an education.

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3. EdAward.org

For former AmeriCorps, VISTA, and NCCC members out there, check out the official CNCS website on the Segal AmeriCorps Education Award. The Education Award—around $5,000—can be used to pay back student loans and/or to pay tuition at qualifying schools.

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If you’re thinking ahead about financial aid for grad school, consider these additional resources from Idealist:

Amy Potthast served as Idealist’s Director of Service and Graduate Education Programs until 2011. Read more of her work at amypotthast.com.

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