Student Loan Repayment 411

Posted by Judy Anne Cavey on Jul 28, 2011 in , , | No Comments

There are three helpful sites you’ll want to bookmark regarding your student loans…

Congratulations! You’ve survived the loan application process and your education is funded. Now what? It’s imperative you take some time to organize paperwork, mark your calendar and understand a few tips from the experts.

Sites to Bookmark

The first site is Suze Orman’s, go to the home page where you’ll find “The Suze Scoop”, Repaying Student Loans, this article is dated 2/17/11. Another site, (which Ms. Orman mentions), is by college financial expert Mark Kantrowitz, Finaid. The final site is FastWeb, which has a Repaying Student Loans Quick Reference Guide that is downloadable. This reference shows “Key Student Loan Resources” on a long list with web addresses and phone numbers you’ll want to keep handy.

Important Basic Information

FastWeb’s Quick Reference Guide offers useful information for anyone with a student loan. One of the first items discussed is that you must get organized. It’s easier than you might think.

First, go to Finaid’s checklist, they provide a blank form to list all of your student loans. Next, put every piece of your loan paperwork into a big manila folder, label, and be sure an store it in a safe place. To be extra cautious, send a copy to your parents or guardian. Last, mark your calendar reminding you of the first payment due. This is extremely important, as almost one third of borrowers are late or delinquent on the first payment! Even if you don’t receive a coupon booklet or statement, you still owe the money.

One way to ensure you’ll never miss a payment is to set up an automatic payment through your checking or savings account. Many lenders offer discounts if you go this route–0.25%-0.50% in interest rate reductions–while others might require electronic billing. But do take advantage of their discount and at the same time automatically pay your bill. Depending on where you have your checking, keep track of the minimum allowed in the account and deposit sufficient funds to cover your loan.

Interest is Deductible

The interest you pay on your federal and private student loans can be deducted–up to $2,500 every year. Check with FastWebs Quick Reference Guide for more information on how to deduct your interest.

If you are uncertain about what is a deduction, check with a Tax Accountant and go to the IRS site.

Loan Forgiveness and Public Service

Wouldn’t it be nice to have a job that qualified you for “loan forgiveness”? Federal student loans are eligible, not private student loans. You must be employed, full-time, for 10 years in a public service job. Those jobs include: police, fire, EMT, government, military, public education, public health, social work, public interest law, public librarian and 501(c)(3) nonprofit organizations.

Be sure to investigate this program thoroughly and understand all the details, as this loan forgiveness is a benefit if your loan amount exceeds your income.

Defaulting is a Serious Mistake

The penalties for defaulting on your student loan are severe and the long term problems you’ll face can devastate a bright future. The federal government can garnish your wages–up to 15%–and also go after Social Security benefits. Not only that, you can be charged fees of up to 6% for each late payment. Collection charges are up to 25% and can be deducted from each payment, slowing your repayment process considerably.

Above and beyond monetary penalties, the feds can block any professional licenses you’ll need to work, stop credit card loans, car loans, home mortgage loans and could make it harder to even rent an apartment or get a job.

Basically, you really don’t want to default on any of your student loans!

See next Monday’s “Quick Tip” about what happens to your student loan in emergency situations, Student Loan Cancellation 911.


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