Col­lege loan pay­ment plan

Min­i­mize in­ter­est, avoid de­fault

Daily Press (Sunday) - - Success - El­liot Raphael­son wel­comes your ques­tions and com­ments at raphel­liot@gmail.com.

It's no se­cret that stu­dents who re­cently grad­u­ated from col­lege are fac­ing large stu­dent loan bal­ances, which likely will take sev­eral years to pay off.

Grad­u­ates who have more than one stu­dent loan out­stand­ing should es­tab­lish good records of the var­i­ous loans and es­tab­lish a plan for re­pay­ment that min­i­mizes the in­ter­est paid over the terms of the loans.

It is also im­por­tant to avoid scams as­so­ciate with stu­dent loan re­pay­ment. Ch­eryl Munk re­cently wrote a com­pre­hen­sive ar­ti­cle in the Wall Street Jour­nal in­di­cat­ing many mis­takes that stu­dents can make re­gard­ing re­pay­ment of stu­dent loans.

Some grad­u­ates will have a six-month grace pe­riod to find a job be­fore re­pay­ments are re­quired. For many, pay­ments will be­gin in Novem­ber. It is pru­dent to make a list of all loans and loan ser­vicers. As Munk pointed out, the com­pany that made the loan may not be the same com­pany ser­vic­ing the loan.

Pre­par­ing a doc­u­ment that iden­ti­fies each ser­vicer name, ad­dress, phone num­ber and web­site, as well as the min­i­mum amount of each loan pay­ment and the due date, is es­sen­tial.

Any bor­row­ers who are not sure of their out­stand­ing fed­eral loans out­stand­ing should visit nslds.ed.gov, click on “Fi­nan­cial Aid Re­view” and log in us­ing their user name and pass­word. When stu­dents ini­tially ap­plied for fi­nan­cial aid, the user name and pass­word were es­tab­lished. For pri­vate loans, stu­dents can con­tact their loan com­pany di­rectly or con­tact the school's fi­nan­cial aid of­fice for in­for­ma­tion.

In or­der to make sure that loan ser­vicers pro­vide stu­dents with up-to-date loan in­for­ma­tion, stu­dents must no­tify th­ese providers with the lat­est ad­dress. It is nor­mal for stu­dents to change ad­dresses af­ter grad­u­a­tion. Fail­ing to keep ser­vicers ap­prised of the lat­est ad­dress may re­sult in not re­ceiv­ing nec­es­sary in­for­ma­tion from the ser­vicer.

If a stu­dent re­turns to school at least half time, he or she may be el­i­gi­ble for a de­fer­ment. Nat­u­rally, in this sit­u­a­tion, the stu­dent should no­tify the ser­vicer with ap­pro­pri­ate doc­u­men­ta­tion.

There are tools that can be used to re­duce the in­ter­est paid. For ex­am­ple, with some ser­vicers there is an in­ter­est rate in­cen­tive for en­rolling in an au­to­matic pay­ment plan. Ask your ser­vicer if such an in­cen­tive pro­gram is in ef­fect.

Stu­dents who find that they can't make a min­i­mum pay­ment for their pri­vate stu­dent loan for any rea­son should con­tact their loan ser­vicer in ad­vance. The ser­vicer may be able to of­fer a tem­po­rary in­ter­est-rate re­duc­tion or other op­tions. It is im­por­tant to work with the ser­vicer in this sit­u­a­tion in or­der to avoid a de­fault in the case pay­ments are missed.

For fed­eral stu­dent loan op­tions, if you are look­ing for op­tions to re­duce your re­quired monthly pay­ment, con- tact the Depart­ment of Ed­u­ca­tion to de­ter­mine your el­i­gi­bil­ity for in­comedriven re­pay­ments. If you are el­i­gi­ble, you can re­duce your monthly pay­ment, and af­ter 20 or 25 years (de­pend­ing on your de­gree), your out­stand­ing bal­ance can be can­celled. How­ever, the can­celled amount will be con­sid­ered tax­able in­come.

Un­for­tu­nately, there are many re­pay­ment scams that should be avoided. Be­ware of any com­pany that charges an up-front fee, promis­ing lower debt or debt for­give­ness. If you are called ran­domly by a party claim­ing to be as­so­ci­ated with the govern­ment or a loan ser­vicer, never pro­vide con­fi­den­tial loan in­for­ma­tion.

You should al­ways first con­sider op­tions of­fered by your loan server for pri­vate loans, and by the Depart­ment of Ed­u­ca­tion for fed­eral loans.

It's im­por­tant to un­der­stand the dif­fer­ent reg­u­la­tions be­tween fed­eral and pri­vate stu­dent loans. For ex­am­ple, the de­fault reg­u­la­tions are dif­fer­ent. With a fed­eral loan, you are con­sid­ered in de­fault if a pay­ment has not been made for 270 days. With a pri­vate loan, you could be in de­fault af­ter miss­ing one pay­ment.

You could also be in de­fault if a cosigner dies. You should ex­plore the pos­si­bil­ity of ob­tain­ing a co-signer re­lease with your pri­vate lender.

It is im­por­tant for you take the nec­es­sary steps to avoid de­fault. Be­ing in de­fault will de­stroy your credit rat­ing, and limit your op­tions in ob­tain­ing em­ploy­ment, get­ting ap­proval for a mort­gage and ob­tain­ing other credit.

WAVEBREAKMEDIAMICRO/DREAMSTIME

By El­liot Raphael­sonThe Sav­ings Game

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