Tips for Managing Your Loan Financial Aid Basics
Getting your online degree is an important decision, and Grantham University will gladly help you secure the financing you need to achieve your goal of education. The following tips and suggestions are intended to help you manage your loan successfully.
You can also access www.studentloans.gov for additional information regarding managing the repayment of your loan.
- Find out what your total debt is, what kind of loans you have, and how to pay.
- Check http://www.nslds.ed.gov/nslds_SA/ to get a complete list of your student loans and the details of each loan.
- Keep records and important paperwork in a safe place.
Choose a repayment plan that works for you.
- Standard Repayment Plan – Payments are fixed with a minimum monthly payment of $50 and a repayment term of up to 10 years. This plan yields the lowest overall interest cost compared to other repayment options.
- Extended Repayment Plan – This plan offers you the choice of either a fixed or graduated monthly payment schedule. With the fixed payment option, you pay the same amount each month until your loans are paid in full. With the graduated payment option, your payments will start out slow and increase every two years with a minimum monthly payment of at least $50 or the amount of interest accrued per month, whichever is greater.
- Graduated Repayment Plan – Under this option, monthly payments are lower for the first 2-3 years of repayment and gradually increase over the remaining period of repayment.
- Income Contingent Repayment (ICR) Plan – If you qualify for this plan, the monthly payment amount is based on your (and your spouse’s, if applicable) adjusted gross income, family size, and total amount of Direct Loans. As your income changes, your payments may change. If you do not repay your loan after 25 years under this plan, the unpaid portion will be forgiven. However, you may have to pay income tax on any amount forgiven.
- Income-Based Repayment (IBR) Plan – For borrowers experiencing financial hardship, the IBR Plan offers monthly payment amounts based on your income. Payment amounts may be adjusted annually.
Watch out for monthly payments that are lower than the interest that accrues on your loan each month. This will increase your debt to such a level that you may never be able to pay off the principle. For more information, see Repayment Plans.
Consolidation is the process by which a lender pays off all of your individual loans and refinances the total balance into a new consolidation loan with a fixed interest rate and one monthly payment. Because the total balance is higher, you will have a longer repayment term with lower monthly payments. In addition, if you consolidate during the six-month grace period prior to entering repayment, your interest rate will be fixed at the lower grace period rate. Here are some guidelines for consolidation:
- You should have more than $10,000 in federal student loans to make it worthwhile.
- The loans you wish to consolidate must all be under your Social Security Number.
- Do not consolidate federal student loans with private student loans. If you consolidate your federal loans into a private consolidation loan, you will lose your federal benefits (e.g. fixed interest rate, deferments, subsidized interest, etc.).
- Consolidate your loans (if this is the best option for you) so that you have one monthly payment.
- If you do not consolidate, have your lender combine your loan payments into one monthly bill.
- Have monthly payments automatically deducted from your bank account. Most lenders offer a .25% or more interest rate discount for choosing the automatic payment method.
- Paying on time will help establish good credit.
- Paying on time will decrease the total interest that accrues on your loan.
- Delinquencies and defaults on student loans will lower your credit rating.
- Defaulted loans are turned over to the federal government for collection.
- The entire loan balance (principal and interest) can be made immediately due.
- You will lose all deferment options.
- You will lose eligibility for additional Federal Student Aid.
- Your account may be turned over to a collection agency, possibly leading to additional interest charges, late fees, collection costs, court costs and/or attorney fees. The costs add up quickly, making it more difficult to pay off your loans.
- Your account will be reported to national credit bureaus, and your credit rating will be damaged.
- You might find it difficult to receive other types of credit, such as credit cards, car loans, and mortgages. Because many landlords and employers do credit checks, it might even be difficult to rent an apartment or secure employment.
- The default will remain on your credit report for up to seven years.
- Your federal income tax refunds (and in some states, your state income tax refunds) might be withheld.
- Your employer, at the request of the loan holder, may withhold (garnish) your wages.
- In some states, you might not be able to obtain a professional license.
Do these consequences sound serious? They are. So don’t let default happen to you! Contact your lender/servicer as soon as you think you might have trouble making payments, and don’t ignore calls or letters from your lender or servicer. Ignoring the problem is never the answer because your loans won’t go away. Talk to your lender/servicer and ask about options for making repayment easier. Get the details from your lender/servicer on how you can benefit from the options discussed above. Don’t default!
If you are unable to make your loan payments, see Deferment and Forbearance for how to postpone payments and avoid default.
Call Grantham University today at 888-947-2684 to find out about our low tuition rates and financial assistance opportunities that may be available to you.