Stay Out of the Student Loan Doghouse
A student loan is the first experience with credit management for many students. To protect your credit history, you must take proactive steps to successfully repay your student loan. Below are student loan guidelines to consider before borrowing, during school and after school, when entering repayment.
Borrow only what you’ll need. When accepting a student loan, know how much money you’ll actually need to cover your school expenses, which include your basic living expenses for the school term. Many students will be offered more loan funds from outside sources than they actually need. Be cautious in pursuing additional loans outside of those offered by your financial aid office. Ask the financial aid counselor for advice if you’re considering taking a “private” student loan in addition to those that have been offered by the financial aid office. Since loans must be repaid, it’s best to borrow only what you need to pay for school.
Be salary savvy. Consider the starting salary for your chosen occupation before taking out student loans. A good rule of thumb is to make sure your student loan payments won’t exceed eight percent of your first-year monthly income after graduation.
You can use the SLOPE (Student Loans Over Projected Earnings) calculator found at www.okcollegestart.org, Oklahoma’s higher education’s new one-stop-shop for college planning resources, to compute your future monthly student loan payment. This estimated payment is based on the type of loan and amount borrowed, as well as your expected starting salary, selected from 20 occupational categories. The usual repayment term for FFELP loans is 10 years.
Know your dough. Visit the Oklahoma Guaranteed Student Loan Program’s Web site, www.ogslp.org, to learn more about the specifics of federal student loan programs and how you can make them work for you.
Always go for free money first. When paying for school, take advantage of all grants, scholarships and college savings available to you before taking out a student loan. If you must borrow to pay for school, exhaust all federal loan options before considering “private” (sometimes called “alternative”) loans, which can have higher interest rates and fewer flexible repayment options.
Shop around for a student loan lender. Some lenders offer benefits up-front and during the repayment phase of the loan that you will want to take advantage of. These benefits may include waiving origination or default fees as well as lowering interest rates for timely payments.
Monitor your needs. Last semester, did you find yourself with excess loan funds or were you struggling to get by? Monitor your needs and adjust your borrowing accordingly. Decide each time to borrow only what you need for school.
Take interest in paying your interest. If given the option to pay the interest accrued on unsubsidized loans during your college career, do so. These quarterly payments are usually affordable on a tight budget and can save you hundreds over the life of your loan!
Ponder payments. Start thinking about repayment before it begins. Make sure you adapt your budget to include your monthly student loan payment before your grace period ends. Consider your spending habits and priorities; are changes needed to make room for your loan payment? Should you delay the purchase of a new car for a while to make room for your student loan payment? If you think ahead, you'll be in good shape when repayment begins. Also, select the best repayment method. For example, some lenders reward borrowers for using electronic banking to make their student loan payments. Setting up an auto debit from your checking account reduces the risk of late payments. Talk to your lender about these options.
Don’t nix the fixed. Recognize that your student loan payment is a fixed expense. Repaying your student loan is not optional, even if you withdraw from school before graduating. Remember, your monthly student loan payment is just as important as your rent, car payment or any other fixed monthly expense.
Pay your dime on time. Make your loan payments on time or your credit score could suffer! If you know your payment will be late, contact your lender immediately to discuss your situation. Even if you apply for a deferment or forbearance, continue making payments on your student loan until you receive confirmation that your request has been processed and approved.
Talk it up. Communicate with your lender regularly. Remember to notify your lender of any changes in your name, address or ability to repay.
Revamp your repayment. Consider different repayment schedules. Lenders offer alternate repayment plans to address borrower needs. Also, if you need more flexibility due to economic hardship, unemployment or other unforeseen circumstances, there are several options to help you keep your account current. Bear in mind that flexible repayment programs aren't automatic - if you need help, you have to request it.
Don’t discard documents. Keep copies of all loan correspondence. Create a "my student loan" file to hold statements, notices and other important documents.
Ask questions! This is your money we're talking about, so don't be afraid to ask for help or for more information when you just don't get it. Call the financial aid department, your lender or your guarantor.
This information presented in cooperation with Oklahoma Money Matters, the financial education outreach initiative of the Oklahoma Guaranteed Student Loan Program. For more information about OKMM, visit www.oklahomamoneymatters.org or call 1-800-970-OKMM.