Managing your student loan starts the moment you apply for it. Aside from doing all the research on the types of loans available, the law also requires you to attend an entrance and exit counseling before and after you get your loan. You should pay attention to what your responsibilities and rights are regarding the money you borrowed and the terms of payment. You can contact your loan servicer any time as well if you have clarifications or questions about your loan terms.
If you are still pursuing graduate studies or are serving the military, you can also defer loan payments. Do keep in touch with your loan servicer so you can arrange payment when you’re done with school or are already out of duty. What if you become unemployed or got sick and cannot work? You can arrange to defer payment, too, under these circumstances. What’s important is that you talk to your loan provider right away if you find yourself in these situations.
But what if you are working but are not earning enough to sufficiently pay your student loan burden? Certain programs, like the “pay as you earn” plan allows you to pay only 10 percent your discretionary income based on how much you earn and your family size. If your repayment plan is “income based” meanwhile, your payment is 15 percent of your discretionary income. The “income contingent” repayment scheme is based on 20 percent of your discretionary income and is best suited for those with very low incomes. In this arrangement, any balance that remains unpaid after the loan term is forgiven.
Your loan may also be forgiven if you work in certain public service fields. Policemen and other law enforcers, teachers, doctors, nurses, healthcare personnel, and government employees can apply for the Public Service Loan Forgiveness Program or the Teacher Loan Forgiveness Program. In a nutshell, your balance is forgiven after you have made 120 payments on your loan. So make sure to check this out if you are working in education, public health, emergency management, the military, or the government.
You can also opt to extend your loan to take advantage of the lower monthly payments. So if your loan is scheduled to be fully paid in 10 years, you can change the payment schedule to 20 or 25 years so that you are not burdened with higher monthly dues. However, always remember that the longer you keep a loan, the more you will pay in interest. Most of the time, the interest paid on the student loan debt is even higher than the principal!
Don’t forget to deduct federal loan interest payments from your taxable income. Just make sure that you follow the IRS rules for doing so. Also, don’t forget that there are no penalties for paying your student loans early. Unlike home mortgages, prepayment penalties do not apply to student loans.
Student loans can help you get your college degree which will put you on track towards a higher paying job in the future. However, it can immediately turn into a burden if you don’t manage it wisely and pay it off on time. Don’t make the mistake of letting your student loan haunt you until you retire. Learn all you can about it, repay it as soon as possible, and don’t forget to talk with your loan provider right away as soon as you realize that you are going to have a hard time making the monthly payments. The sooner you talk to your provider, the earlier a solution can be found.
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