Heading to graduate school? Here are 5 tips on managing student loans

It’s back-to-school time! To help you prepare, each Tuesday over the next few weeks, we’re featuring advice on finding, applying, and paying for graduate school. Read our first post on three good reasons (and one bad reason) to go to grad school and our second post on finding the perfect graduate degree program. Want more information? Be sure to visit our Graduate School Resource Center and attend a free Grad School Fair near you!

In this piece,  student loan expert Heather Jarvis shares tips on how to manage your undergrad loans and make sense of your graduate school loans. You can also learn more by listening to our podcasts on the Public Service Loan Forgiveness Program and Income Based Repayment Plan.

by Heather Jarvis

Get the help you need to understand your student loans (Photo credit: Phillip Taylor PT, Creative Commons/Flickr)

If you’re thinking of grad school, here’s what you need to know to get a grip on those student loans.

1.  Start by pulling together your student loan information.

Many of us borrowed to finance undergraduate school.  It makes sense to take an inventory of what you’ve got before starting graduate school.  That will help you decide what you can afford.  You’ll find all your federal student loans listed in the National Student Loan Data System and you can check for those pesky private student loans by pulling a free copy of your credit report from AnnualCreditReport.com.

2.  Understand when your first payment is due.

Most student loans have a six-month grace period before you have to start making payments.  In most cases, Class of 2012 grads will start paying around November or December.  If you enroll in graduate school, you can postpone your payments while you are taking at least a half-time course load using an “in-school deferment”.

Student loans only ever have one grace period.  If the six-month grace period on your undergrad loans expires before you go to grad school, payment will be expected on those loans right after you’re done with your grad program (although borrowers can typically secure a forbearance to postpone payment if necessary).  Your new grad school loans will have their own grace period.

Some undergraduate loans include an interest subsidy so that the government pays the interest during in-school deferment (for example while you are in your graduate program).  But many of us also have unsubsidized loans, and interest on those loans will keep adding up whether or not you’re in school.

Sadly, nobody can get subsidized loans for grad school anymore and interest starts to accrue straight away.  Unless you make payments as you go, your debt will be increasing the whole time you are in school.  Yikes.  Borrow as little as you can, and consider whether you can afford to pay some of all of the interest that accrues while you are in school–you’ll save yourself some big bucks!

3.  Decide whether consolidation makes sense for you.

Heads up Idealists!  Consolidation allows you to group your loans together into the Federal Direct Loan program.  That’s important because only Federal Direct loans are eligible for Public Service Loan Forgiveness. But be careful deciding whether to consolidate Perkins loans, because they have their own cancellation provisions that would be lost upon consolidation.

Student loan borrowers can consolidate either before or after grad school, but not while you are enrolled.  The decision depends on your particular situation.  Get a sense about how consolidation might work in your circumstances using the free personalized assessment offered on GLAdvisor’s site.

4.  Choose your own repayment plan.

If you’ll be out of school beyond your grace period, you’ll need to start making payments (although you can postpone repayment while in grad school).

Choosing a repayment plan can be confusing, but if you don’t choose a repayment plan within 45 days of being notified, your loan servicer will automatically put you into a “standard” repayment plan, and that might or might not be the best plan for you.

If you need reduced monthly payments (for example during a job search), consider the income driven repayment options.  Income-Based Repayment is available now and is a good option for people with low income compared to student loan debt.  Monthly payments are based on a percentage of income so that when you don’t earn a lot, your payments are low.  You’ll need to determine which repayment options are available to you, and evaluate which of the available options provides the most benefits.

Use the Department of Education’s calculators to estimate how much you’ll pay under the different repayment plans.

5.  Know where to go with questions.

Your loan “servicer” handles the billing and administration for your loan (find out your servicer on the National Student Loan Data System).  You can get in touch with your school’s financial aid office.  Some of my favorite sites include:

  • StudentLoanBorrowerAssistance.org (terrific site especially for borrowers struggling financially)
  • Finaid.org (comprehensive information and some really spiffy calculators)
  • GLAdvisor (student loan management and financial advice for hire; I do some consulting for them)
  • askheatherjarvis.com (My site!  Loads of info on Public Service Loan Forgiveness and more)


About the Author

Heather Jarvis

Former capital defense attorney and long-time public service advocate Heather Jarvis dedicates herself to helping students make informed decisions about their student loans.

Since 2005, Heather has helped more than an estimated 25,000 students understand and overcome college debt through in-person and online trainings and resources.

Want to learn more about Public Service Loan Forgiveness?  Heather provides free tools and information for student loan borrowers and the people who love them at askheatherjarvis.com.

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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.


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?


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.


"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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Q&A: What the debt ceiling deal means for your student loans

Guest blogger Heather Jarvis provides education and training “for student loan borrowers and the people who love them.” Here she sums up what college students, recent graduates, and folks considering grad school need to know about the debt ceiling deal.


Do those peaceful hours studying feel like a long time ago? It's never too late (or too early!) to understand your student loans. Photo via Tulane Public Relations (Flickr/Creative Commons)

Last week the House and Senate passed the Budget Control Act of 2011 [PDF] just ahead of the deadline, and President Obama has signed the act into law. Key student aid programs are largely intact, and I am relieved to report that the new law avoids some of the proposed cuts that would have hurt students the most.

There are three main provisions in the debt ceiling deal related to higher education:

  • Funding is provided for the Pell Grant program.
  • The in-school loan interest subsidy for graduate and professional students is eliminated beginning July 1, 2012.
  • “Repayment incentives,” or cost reductions earned by certain borrowers, are eliminated for loans disbursed on or after July 1, 2012.

Now for some Q&A…

Q. Students shoulder $4.6 billion of the deficit reduction (so far)?! How is that possible?

The elimination of the graduate and professional interest subsidy and the loan repayment incentives are estimated by the Congressional Budget Office to produce a savings of $21.6 billion. $17 billion of that savings will go to shore up the Pell Grant program, and $4.6 billion will be used to reduce the deficit. Read on for more details about all of these changes.

Q. I have student loans. What steps should I take?

  • Always borrow federal student loans first and only consider more expensive private student loans if you must.
  • If you are still in school and you can afford it, consider paying student loan interest as it accrues.  You’ll lower your costs over time.
  • Choose the repayment plan that makes the most sense for you. Income-Based Repayment (IBR) is a good option for people with low income compared to their student loan debt.
  • Pay off your most expensive loans first.
  • Find out if Public Service Loan Forgiveness can help.

Q. Is my Pell Grant safe?

Pell Grants are safe for now; the White House indicates that the funding will be sufficient to keep them at their current level of $5,500. If they  had been cut, students may well have had to increase their reliance on student loans. Thankfully, the Budget Control Act shores up the Pell Grant program by providing $17 billion in funding over the next two fiscal years. However, with spending cuts anticipated in the future, Pell Grants remain at risk.

Q. What should graduate and professional students expect?

Graduate and professional students will pay more for student loans. The Budget Control Act eliminates the in-school interest subsidy for graduate and professional students, so these folks will pay more interest over time.  However, it does not eliminate the interest subsidy for undergraduate borrowers.

Subsidized Stafford Loans have historically been available to both undergraduate and graduate borrowers with demonstrated financial need.  In the case of Subsidized Loans, the government pays the interest that accrues on the loan while the student is in college.  Without the subsidy, students must themselves pay the accruing interest as they go, or have the unpaid interest added to the principle amount of their loan and pay it later.

(Ed. note: You can learn more about financial aid on our financing your graduate education page.)

Q. What about repayment incentives?

To encourage borrowers to repay on time, the Department of Education was previously authorized to provide certain incentives, including an origination fee rebate and interest rate reduction.  Borrowers would earn these benefits by making on-time payments over 12 months.  Beginning on July 1, 2012, the Department of Education is no longer authorized to provide these repayment incentives, but may continue to allow an interest rate reduction for borrowers who enroll in payment by automatic electronic debit.

Q. Is it possible that there will be even more cuts to student aid?

Yes. The Budget Control Act requires Congress to come up with a lot more deficit reduction by Thanksgiving.  Additional spending cuts may come in part from higher education. Stay tuned…

Do you have additional questions we can try to answer? Leave a comment below and we’ll do our best!

About the author

Former capital defense attorney and long-time public service advocate Heather Jarvis dedicates herself to helping students make informed decisions about their student loans. Since 2005, Heather has helped more than an estimated 25,000 students understand and overcome college debt through in-person and online trainings and resources. As Senior Program Manager for Advocacy and Outreach at Equal Justice Works, Heather played a role in the passage of the College Cost Reduction and Access Act, which made IBR and Public Service Loan Forgiveness a reality.

Want to learn more about Public Service Loan Forgiveness?  Register for one Heather’s popular free webinars and get the scoop.  Heather provides free tools and information for student loan borrowers and the people who love them at www.askheatherjarvis.com.

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