Preparing for Repayment
Managing your money wisely is the key to default prevention. Knowing how much debt you can afford and then managing your debt wisely will help you to be successful in your repayment efforts.
I have a student loan, now what?
If you should drop below half-time student status, or are planning to leave school or graduate soon, you should be prepared to begin repayment of your student loan. Not sure when you will have to make your first payment? The first payment for all federal student loans is due following the expiration of your loan’s grace period.
A grace period is defined as an allotted amount of time during which you are not required to make payments on your student loans after initially leaving school or dropping below half-time status. The grace period is typically six to nine months, depending on the type of loan. The Federal Stafford Loan, for example, has a six-month grace period.
How do I find out how long my loan’s grace period is?
You can find out how long the grace period is on any loan by doing the following:
- Read your loan promissory note. This will outline the terms and conditions of accepting the loan and details concerning the grace period associated with your loan.
- If you have misplaced your promissory note, contact the holder of your loan promissory loan – your lender.
How do I locate my loans?
It is often difficult to keep track of your student loans.
Student loan borrowers may find themselves with accounts
serviced at different locations, owned by different lenders
or even guaranteed by different guarantors. It's not uncommon
for loans to be transferred from one servicer or lender
to another. By locating your loans, you will be able to
find the name of your lender or servicer and get answers
to your questions and keep track of your accounts.
You can visit the National
Student Loan Data System (NSLDS) website for information.
The NSLDS is the U.S. Department of Education's central
database for financial aid. NSLDS contains financial aid
history related to federal student loans and Pell Grants.
In order to access your records on NSLDS,
you'll need to provide your:
- Social Security Number
- the first two letters of your last name
- your date of birth
- your PIN (You were assigned a PIN if you completed the FAFSA (Free Application for Federal Student Aid) on the Web. If you have forgotten your PIN or never received one, visit the PIN Registration Site.)
Preparing for Repayment
Preparing for the successful repayment of your student
loan(s) includes establishing yourself financially, creating
a budget and sticking to it, paying your monthly bills
on time, establishing a good credit record, and being aware
of your spending.
Now is the time to finalize that repayment budget! CSLF
has developed several useful tools to assist you as you
complete your budget plan.
Here are a few steps:
- Analyze your expenses
- Evaluate repayment plans
- Choose the repayment plan that fits your budget
- Create a budget
- Adjust due dates
- Track bills and pay on time
- Establish yourself financially with good credit
Analyze your expenses
Determine where your money goes. Keep track of every
cent you spend for one week. Total it up to see how much
you spend on “incidentals.”
[Expense
Worksheet]
Evaluate repayment plans
Borrowers of Federal Student Loans have many options available to them in regards to repayment.
Choose the Repayment Plan that fits your budget
Go to www.finaid.org/calculators.
Here you will find many different calculations, including Graduated Repayment and Income Sensitive calculations. Simply enter your information to determine what your repayment obligations would be under the various options. Although it is tempting to choose the plan with the lowest monthly payment amount, this might not be the best option for you. The best course of action is to determine what you can afford by creating a budget.
Create a budget
Complete the budget worksheet. Follow it!
Pay your monthly obligations on time to ensure you build a positive credit history record and rating. Do your budget for a weekly basis if you are paid weekly, a bi-monthly basis if you are paid twice a month, or a monthly basis if you are paid once a month. Don’t forget to include expenses that you may pay on a quarterly, semi-annual, or annual basis. These items need to be budgeted for on your pay schedule. You must implement your budget the month prior to your first student loan payment being duet. The type of debt and the amount put away in the example budgets may vary for you. As an example, the item “Emergency Fund” may become “Car Payment.” Creating a budget can be a true eye opener. You may finally get the answer to the question “Why don’t I ever have any money?” A budget must be constantly revisited and revised in order to work for you. Revisit whenever your income or expenses change for whatever reason. An example of this is you decide to purchase a new computer. You don’t have the cash on hand so you use credit. How will you pay the bill? Go back over your budget and see where you can effectively move amounts between items. Don’t get caught in a “robbing Peter to pay Paul” situation. Using a budget forces you to be aware of your financial limitations and can prevent you from experiencing debt overload.
Adjust due dates
After you have created your budget, take a look at your cash flow. Is there one week that is tighter than others? Will changing the due date on a bill ease the cash flow? This is much preferable to finding yourself in a bind the week your budget is tight. When this happens, you may resort to using credit, thus beginning a cycle. You still have a week with a tight cash flow and now you most likely have a created another cash flow problem because your budgeted credit payment has risen. Contact your credit card companies for assistance and see how they can assist you.
Track bills and pay on time
Be aware of when your bills are due and plan accordingly. Just having a budget in place will help create this awareness. Make sure you pay your bills on time.