Getting into college for many students is a very stressful experience. Not everyone may have a clear idea of what they want to study, what schools best fit their interests and most importantly for some, what colleges can they most afford to attend. This post will be addressing the latter as student loan debt in the United States continues to rise.
Before we start to discuss how loan repayment plans work, the key to reducing student loan debt is to take out as few loans as possible whether they be loans from the federal government or private institutions. The smaller your debt the quicker you can repay it and the more likely those repayments won't hinder your life financially. In a previous post we touched on some great ways to save for college.
The chart below shows a breakdown of the most common student loan balances. Your goal should be to keep your balance in the range at the top half of the brackets and with few exceptions, never to end up in the bottom bracket.
Let us assume you have done your research, applied to schools that were the best fit for you in multiple categories and received an acceptance letter to one of the schools of your choice. You've taken on the lowest amount of student debt and the best interest rate you could find to afford your education. Let's start talking about what repayment will look like. First, check out the video below.
How long will it take to pay off my student loan? Bankrate's Student Loan Calculator can help students and their families find the answer. Use the calculator to estimate: Your monthly payments The interest on your loan Benefits of making extra payments Just enter your information and click CALCULATE.
Picking the best repayment plan for you is also key in managing your student loan debt. Some things to consider before picking the right repayment plan include your post-degree earnings/salary and the cost of living wherever you choose to reside. The Federal Student Aid Officer of the Department of Education does a good job of outlining their repayment plans in the article below. CNN and Nerdwallet also examine each option.
Standard Repayment Plan Direct Subsidized and Unsubsidized Loans Subsidized and Unsubsidized Federal Stafford Loans all PLUS loans all Consolidation Loans (Direct or FFEL) Payments are a fixed amount that ensures your loans are paid off within 10 years (within 10 to 30 years for Consolidation Loans). All borrowers are eligible for this plan.
Repaying your student loans can be more complicated than just making a payment each month. For one thing, there are eight different plans you can choose from to repay your federal student loans, including four that are based on your income level. You're not eligible for those plans if you have private student loans.
More than 90% of student debt today is in the form of federal loans. If you graduated from college recently and have a federal loan, you may have the option to temporarily postpone your payments, extend them, or lower them. The challenge is figuring out which of the eight major federal repayment plans is best for your situation.
If you need to take out a private student loan to help pay for college because financial aid doesn't fully cover the cost of your education, remember to still keep your balance as low as possible. The New York State Department of Education has a great comparison tool for private student loan lenders.
Should you get a private student loan? After colleges send out their financial aid award letters, any gaps that are left will need to be filled with college savings or private student loans. Unfortunately, navigating private loans isn't as easy as it sounds.
Projected monthly costs and projected total costs are calculated based on the rate as of this posting and variable rates may change which will alter the monthly and total costs. Fixed rate loans are determined at the time of application approval and will remain the same for the life of the loan.