photo credit: Jason Bache
Graduating from college is certainly the highlight of many people’s lives. As you walk across the stage to grab that well-deserved degree, you might not be thinking too much about those pesky student loans that you took out earlier in your educational studies. However, eventually those student loans will come home to roost so it pays to think about them earlier rather than waiting too late. If you are considering paying off student loans, there are some things that you need to factor into your decision making process.
First of all, it does matter what kind of loans you took out. Hopefully, you’ve kept your paperwork about your student loans and can refer back to them so that you know what kind of contracts you signed. The best thing to do is to make a list of all the student loans you have so that you can make an assessment about everything at one time.
The next thing to do is to add up all of the student loans so you know what the total amount is that you owe. Hopefully, each of the contracts will have a total amount so that will make it easier for you to do the calculations. Remember that you’re only looking at the loans and not grants you may have gotten. Scholarships and grants are free money that you don’t have to pay back while student loans are unfortunately not free.
You also want to know who your lenders are. This might sound like a simple task, but banks regularly transfer or sell loans to other lenders. This is similar to what happens with many mortgage loans. So, you may have to make some phone calls to be absolutely certain who these payments should be made to before you start sending out checks. Although you should have been notified about any loan being sold, we all miss pieces of mail from time to time.
If you are already stressing over how you will pay off your student loans, you might want to look into some of the loan forgiveness programs such as the Peace Corps or AmeriCorps. These groups will pay off part of your college debts if you are willing to commit some of your time to volunteering for the organizations. Also, military service is another option to consider if that interests you.
Of course most people pay off student loans using very traditional means. The longer you wait to pay back your loans after college, the more interest you will have accrued so it’s important to devise a plan early on so you’re not caught off guard. You may decide to pay off your loan in full or stretch it out over a longer term payment. It all depends on what you can work out with your individual lenders. Make a budget and stick to it so that you can get your loans paid off quickly. Nothing is worse than working for several years and always worrying about those lingering student loans in the background.
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I started a new website with friends to help students think of alternative ways to pay down their student loans. http://www.LilysList.com is a student loan gift registry with benefits. Our goal is to help students ease the burden of student debt. Jennifer
@Dawn – Thanks for sharing about this program. I didn’t know about it.
@Jesse – Glad you stopped by…Thanks for the link for more info. I’m sure it will help some folks!
That program Dawn is talking about is called the Income Based Repayment program, that was launched in July 2009. I did a guide for getting started with the program, here: http://www.pffirewall.com/education/guide-income-based-repayment/
I’ve found that my lender has changed at least a dozen times since my loans were started. They are a real pain, but little by little they will get paid off!
We live on $23K/year gross for a family of 4. I have a massive student loan. Last year I discovered there was a new forgiveness program implemented where it stretches your loan out to 25 possible years of repayment, but it is income-based. There is a simple form to fill out and we mail it with a copy of our federal taxes. We are so far into the povery level (we do actually have a very decent living, just exceedingly frugal) that this is the second year of no payments. All payments are, as the program states, income-based so they will always be reasonable for whoever qualifies. At the end of these 25 years the remaining balance is forgiven.
When I discovered this program, I felt like a tremendous weight was lifted off my shoulders. Rather than just deferring payments and my payments would eventually be ridiculous, now, even if we do have to make payments, they cannot be more than a certain reasonable percentage of our income.