Own Your Loan, Don't Let Your Loan Own You

It is often said that the most effective debt management strategy is to be debt-free. But, in order to pay for your college education, you may need to take out student loans. The hope is your student loans can greatly assist in furthering your education. but there are some instances that getting student loans has lead people to be buried deep in debt.

Now, planning for successful repayment involves a certain amount of planning. The planning should start before you place your pen on your first promissory note. Just as you are making a commitment to your career by way of investing time and money in higher education, you should also make a commitment to your financial future by way of effectively managing your student loans from the beginning.

Here are some recommended tips and tactics that may help you handle your student debt effectively and repay the loans successfully.

Tip #1: Do Your Research: Always note that not all loans are the same. Some of them, such as the ones provided by the Indiana Secondary Market for instance, offer benefits during school as well as after graduation in the form of repayment incentives, while other do not.

Tip #2: Pay Attention to the Mail: Typically, every borrower receives important information regarding the student loan he or she took out.

Tip #3: Be Organized: When taking out student loan from a particular institution, it is always best to save all of your student loan documents and correspondences. This makes you aware of what exactly you've agreed, what is expected from you as a student loan borrower, and how much you have borrowed. Also, when setting up your record-keeping system, make sure you will find easy to maintain over the life of the loan.

Tip #4: Be present at All Required Entrance and Exit Sessions: When you take out student loan, you will be required to complete student loan counselling sessions. This is often considered when you first obtain the loan and upon graduation.

Tip #5: Learn to Manage Money like an Expert: It has been said that if you live like a professional while you are in school, you will live like a student once you've finished your degree. In other words, it is important that you know very well how to handle your money while you are attending school. This will help you lessen the total amount you end up borrowing, and in turn, the amount you will responsible for repaying.

Tip #6: Maintain at least Half-Time Enrolment: Considering a half-time enrolment is highly necessary in order for you to qualify for an in-school deferment. The half-time enrolment normally takes six credit hours. Regarding your school's requirements for half-time status, see your financial aid officer.

Tip #7: Take Advantage of Tax Savings: Some of the student who takes out student loans qualifies for tax credits. To see your own status, check with your tax advisor. The credits are actually based on your qualified tuition payments, and they can help reduce the amount of Federal tax you pay.

Tip #8: Start Repayment on Time: As you enter the repayment period, note that being aware of your student loan obligations is very crucial. This is where the student loan default usually happens. It occurs when you fail to pay back the loan as agreed or meet the other terms of your promissory note.

If you need further information regarding your student loans, always remember that the financial aid staff at your school is probably your most important resource. There are also some publications from federal and state governments, lenders and scholarship granting organizations, and financial ad guidebooks that are available from your local book-store.

Monday, February 8, 2010

Direct Student Loan Consolidation

Student loans are two-edged swords. Without them, you couldn't pay for that degree you worked so hard for. On the other hand, without them, you might actually get to keep the amount you pay out every month for yourself. You might get to pay your other bills on time, afford a more reliable car, or find a better place to live.

If repaying your student loans is challenging your budget, or worse, putting your finances - and credit rating - in the red, you might want to think about a direct student loan consolidation.

With a direct student loan consolidation, you exchange your outstanding student loans with their higher interest rates for one loan with a more manageable, fixed interest rate.

A direct student loan consolidation may be the answer to more than one problem. If you have struggled to meet your monthly payments and in fact have used every option for deferment or forbearance your current loans offer, or find yourself about to default on your loan, a direct student loan consolidation can mean a fresh start. A new loan is often a clean slate.

Not only do deferment and forbearance options become available in case of need again, but often direct student loan consolidation gives you a much lower interest rate - as much as 0.6 percentage points - thereby lowering your monthly payments. And when you consolidate those student loans under a new loan, those loans show up on your credit report as paid off, and your credit score benefits.

There are four plans for repaying a direct student loan consolidation that you many want to investigate as you consider which is best for your needs.

The first plan is a Standard Repayment Plan and gives you a fixed monthly payment for up to 10 years. The Extended Repayment Plan also sets fixed monthly payments, but the repayment period is set between 12 and 30 years, according to the total amount you borrow. In this plan your payments are lower because they are spread across a long period of time. Keep in mind, however, that making payments over longer periods of time means you will end up paying out a larger total amount.

The third option is the Graduated Repayment Plan. This is another direct student loan consolidation plan with a repayment period between 12 and 30 years, only in this plan the amount of your monthly payment will increase every two years.

Finally, if you have a job and family, the Income Contingent Repayment Plan may be what you're looking for. This plan sets a monthly payment based on your annual gross income, family size, and total direct student loan debt, and spreads those payments over a period of 25 years.

While direct student loan consolidation may be the best way to get on top of student loans for some, if you are close to paying off your existing loans, it may not be worth it in the long run to consolidate or extend your payments.

However, if you are still seeing loan payments coming out of your pocket well into the future, consider the direct student loan consolidation seriously. If you consolidate your loans while you are still in school, you may qualify for a 6-month grace period before repayment begins. You may find you will be able to keep any subsidies on your old loans.

Lower your monthly payments, improve your credit rating, gain control of your loans, and give yourself peace of mind about the future with a direct student loan consolidation.

Posted by Student Loans at 5:36 AM
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