Once your kids have their diploma in hand, it may seem like they’re officially adults – but they could probably still use your help when it comes to navigating student loan repayment. Here are some tips to help you and your recent grad enter student loan repayment successfully.
Know the basics on student loans
There are generally two categories of student loans – federal and private. Federal loans are made by the U.S. Department of Education, have fixed interest rates, and generally have a number of repayment options to choose from. Private loans are made by banks, credit unions, and financial institutions. Interest rates may be fixed or variable, and they offer flexible repayment terms. These loan options are selected when the loan is taken out. Each type of loan has a loan servicer who sends information about repayment. Advise your grad to always read the correspondence from servicers – it’s sent to make sure that loan repayment goes as smoothly as possible.
Make sure the right repayment plan is in place
Make sure your child talks to their loan servicer to understand their options and determine the best fit for them. With federal loans, there are plans based on income and also forgiveness programs for borrowers meeting eligibility criteria, such as working in certain public service jobs or teaching in certain schools or educational service agencies serving low-income families. Consolidating federal loans or taking out a private refinance loan to combine or lower payments are also options depending upon your grad’s situation.
Stay current on student loan payments.
Federal loans, and many private loans, offer an interest rate reduction if the borrower signs up for automatically withdrawn monthly payments. This can save hundreds of dollars over the life of the student loan repayment – and it’s also a great way to ensure monthly payments are made on time. Missing a monthly payment can lead to late fees and affect the borrower’s credit, depending on how late the payment is.
Remember: Loan servicers are there to help
If it looks like your child is unable to make their monthly payments, whether they encountered job loss or an unexpected hardship – make sure they contact their loan servicer right away. Things don’t always go as planned, but their servicer can review your grad’s account and help determine if deferment or forbearance are possibilities. Servicers also provide access to training programs on topics such as budgeting, managing credit, and other financial literacy tips to help borrowers learn more about how to handle their newfound financial responsibilities.
Lastly, if you cosigned a loan, be sure to monitor your child’s payments
It’s important to remember that cosigned loans are your responsibility as well. If payments are late or missing, they could reflect negatively on your credit score too. You can request access to view the loans you have cosigned online, which allows you to monitor the loan activity. With this access, you can ensure your child is making payments on time, and you can make payments yourself if you choose. You should also review the cosigner release option that many lenders offer. These are generally tied to a number of on-time payments and other acceptable credit criteria, which must be met before a cosigner can be released.
When it comes to managing student loan debt, there are a number of ways borrowers can pay back loans while also building a healthy financial future. Staying in touch with loan servicers, staying current on loans, and being aware of the options available are some of the best ways to help your new grad make smart financial decisions.
Today’s guest article comes from Anne Del Plato – she is the Regional Director for U-fi Student Loans and is an expert in many aspects of financial aid, student loans, and debt management. Anne’s experience includes positions in a number of areas of higher education finance including college financial aid offices, training and outreach development for a state financial aid agency, and most recently, as a Regional Director of Nelnet’s Partner Solutions team. Anne has spoken at numerous financial aid conferences across the Northeastern United States.