Tuesday, October 8, 2013

"Loans, Loans, Loans #womp," by Guest Blogger Ashley Sciora

If you’re reading this blog because you have some student loans weighing you down, welcome to the same boat that Anthony and I are in. Grab an oar, start paddling, and let’s talk about some ways to shed the debt!

Before you leave the safe space of your college or university, if you took out loans to pay for your education, you’ll have to sit through an exit interview to make sure you know the terms of loan repayment. If you’re me, this consists of frantically looking up your odds of winning the lottery and calculating how long a person can survive on pasta.  Had I paid a little more attention, I probably could have breathed a little easier knowing that there are options available.

Identify your loan holder
While the Department of Education may have a corner on the market, there are plenty of other entities who are willing to lend you money for school.  You can’t find out what options are available to you without figuring out who you have to pay back. Other common sources of loans: private banks and state departments of education.  Your school’s financial aid office should be able to help you with this.

When the grace period’s over…
Most, if not all, loans come with some sort of grace period; breathing room to figure out what your strategy is when the first payment request comes.  The federal government gives you six months, while other loan servicers may give you a shorter stretch of time.  The grace period is usually determined by the amount of time needed for the servicer to determine that you have graduated, won’t be re-enrolling in school and should be making payments.  A quick call to your loan servicer or a visit to their website’s FAQ section should help you make a timeline before repayment.

To Consolidate or Not Consolidate?
Most of us have multiple loans to our names when we graduate – whether your servicer granted a loan for a semester or a year or if you’re juggling multiple servicers, you’ll have multiple balances owed.  Consolidation will be the first option most of us consider.  The process of consolidation, if you’re eligible and the specifics of your arrangement will vary, but who cares about all that if you don’t know what consolidation means?  Consolidating your loans means that you’re essentially taking out another loan, equivalent to the balances on all of your eligible loans (you can only consolidate loans with the same servicer).  Consolidation is a much-talked about option, but may not be best for everyone.

Things to Consider:
  • Decrease in monthly payment. It may be a marginal decrease, but in this economy, any little bit helps!
  • Convenience. If you’re like me, you may get some piece of mind from only having to look at one balance and one statement per month (assuming you only have one servicer.)
  • Change in interest rate. If I were to consolidate my student loans from my home state, the interest rate on the consolidated loan would be an average of my existing loans.  (Some of my loans had lower rates than others, that all gets factored into a new rate for the new loan.)
  • Length of repayment. You’ll have longer to payback the consolidated loan, but that means more that you’ll end up paying in interest.
  • Effect on deferment/forbearance options. Depending on your servicer, consolidating existing loans can have make you eligible for or disqualify you from some deferment or forbearance options.
Well, that's enough of that for now. The bottom line is not to panic! Educate yourself about your options and work out an appropriate repayment plan. Also, look out for a follow up post about loan discharge, forgiveness programs, and deferment/forbearance. Let us know about your thoughts and experiences with student loans in the comments!

1 comment:

  1. Loans are the bane of my existence. Also don't forget the 10 year public service forgiveness plan :)