It's Time to Pay Back!

If you are one of the recent graduates, you very likely have graduated with the help of student loans.  You are a young adult and trying to start your career while juggling student loan payments, pay your rent and cover other bills.  As many types of student loans there are currently available for students to take advantage of, there are just as many options a recent graduate has when it comes to re-payment options.  For those who did not take advantage of scholarships, did not qualify for grants or did not take advantage of many cost cutting community college options to complete a part of their education, what is the best option to manage debt?!

Lets take the first option not to pay debt off the table immediately!  Missed/late payments on student loans are reported to the credit bureau and can damage your credit score; which in turn affects your credit score.  This can affect one’s ability to get good terms on a loan in the future, get decent apartment or a mortgage loan, and in some cases disqualify you from employment.  Further, defaulting on your student loans can result in your school, the lender or the government taking action to recover the debt.  

If you think you are out of options, think again!  Most of us are familiar with the term forbearance; or at least should be.  Working in reverse, the last resort should be if you find yourself without means to pay for your student loans, forbearance.  Your lender will allow you to place your student loans in forbearance up to 6 months at the time.  This means that you will not be required to pay your student loans for that period of time.  One should keep in mind that if in 6 months you find yourself still not being able to pay, you must request again.  If you do not, payment will be due; and if you do not pay it will count as miss payment/s. 

If you are in the middle; meaning if you cannot afford fully amortized payment, you have options such as interest only, income sensitive, graduated and/or extended graduated.  These re-payment plans work with borrowers and their current situations.  Entering in any of these plans will extend the amount of time you will pay for your loans, and combined with a thing called interest rate, will result in more paid then if you had a fully amortized payment. 

The best option of course is to be in a situation be able to pay standard re-payment plan.  In other words, if you get out of college with student loan balance that results in a payment that you can afford (or if you find employment that pays sufficiently to support the mentioned payment if you will), the best way is to make a sound financial decision and make your student loans a priority by making scheduled payments in the amount that will result in $0 balance at the end of agreed period (most commonly 10 years / 120 instalment payments). 

In conclusion, one should use all resources at hand to avoid the student loans going into default.  Educate yourself about the type of the loan you have and what options you have in case you aren’t in a position to pay full amount.  If you have means, best advice is to pay fully amortized payment.  Alternative to this is you becoming defaulted on, in most cases, federally insured debt which can lead to but cannot be discharged in Bankruptcy!