Fear Not, Student Loan Borrowers

The daunting task of finding a job after graduation is often multiplied by the onslaught of student loan payments. Though hiding from lenders may seem like a good idea, lenders will ultimately receive payments either through wage garnishments or through threats of ruining borrowers credit. Fortunately, programs to help both private loan and federal loan borrowers repay loans and avoid default are available. Most importantly, cast aside shameful thoughts regarding student loans. On average two-thirds of college graduates have student loan debt and about 10 percent have over 90K weighing them down.

It is easy to tell students that taking loans should be a last resort option, but with families depleting savings to cover the rise in college costs, loans have frequently become a burden carried by young adults. Knowing that students will graduate with significantly higher debt compared to previous generations, they should be aware of how to manage large monthly payments.

Talk to the lenders. Yes it is that easy. Most lenders offer a 6-month grace period for undergraduates. Do not wait until the grace period has ended to calculate monthly payments or decide to consolidate. These tasks take time, sometimes up to 60 days, so waiting until the loan’s grace period is up might stick you with a couple months worth of unnecessarily high payments. Instead, ask each lender about forbearance, deferment and alternative repayment options. This way if you end up in a worst-case scenario you will have a contingency plan.

Not all loans are created equal. Students who have government loans and private loans will quickly find that federal loans provide more flexible repayment options. Federal loans have deferment options that allow students to postpone payments due to factors like unemployment, military duty or a decision to head back to school. If the student is not eligible for a deferment, the next option would be a forbearance. Forbearance takes into account the student’s current finances and postpones or reduces payment based on that information. It is important to remember that while in forbearance interest continues to accrue, however, if making payments is problematic take advantage of this opportunity. Both deferrals and forbearances are only available for certain lengths of time, so checking with you lender is necessary.

If deferrals or forbearances are not available, like with many private lenders, students should begin asking about repayment options. Some lenders offer graduated or tiered repayment programs. These alternatives allow students to begin paying their loans in smaller increments. This option is best for those young adults who have just landed their first job and still struggle to balance the finances associated with living independently.

This is one area where speaking with the lender can prove monumental. Based on the students chosen profession they may be eligible for lower payments or even loan forgiveness. Many non-profit and low-income professions, such as social workers, are eligible for these programs.

Finally, if multiple lenders and loan accounts are an issue, students should inquire about consolidation loans. Consolidation loans allow the student to combine their accounts making one payment instead of several. In some situations students can opt to extend their loan period, effectively lowering their monthly payment.

Since the economic downturn in late 2008, however, private student loan consolidation options have become almost non-existent. Fortunately, federal student loan consolidations are still available. Federal and private loans should not be consolidated. The perks of federal loans, like low interest rates, forbearance options and deferments are often lost when consolidating with private loans. Though you may not need those options at the moment, they could prove invaluable over the life of the loan.

Most importantly, when dealing with lenders you will often be surprised how much help they can provide when asked. Disregarding payments and avoiding lenders often leads to a sense of hopelessness and in many cases unnecessary damage to a payer’s credit history or even garnished wages. Approaching vendors with a compromising attitude and the information above can only increase chances of adequately fulfilling responsibilities as a college graduate and borrower.