3 Important Financial Considerations for College Students

budgeting

The U.S. Department of Treasury recently released a report entitled “Opportunities to Improve the Financial Capability and Financial Well-being of Postsecondary Students.”  I read this report because I am an intern in the office of Federal Student Aid at the Department of Education, and I am working on various projects related to financial literacy for college students. I actually found this report to be a worthwhile read as a college student embarking on the daunting journey of funding my college education and managing my money while in school.

Despite the heavy financial burden, most of us understand the necessity of a college degree. Report after report make evident that education is one of the most significant factors in upward economic mobility. Still, college students face not only education loans but also consumer debt. There are so many important decisions that college students have to make in support of the ultimate goal to become financially independent. And, as tuition, books, housing and more only rise, the dream of financial independence has only become more difficult, and stressful.

Although I am no expert in financial literacy and financial aid, learning about responsible borrowing, careful budgeting, and repaying loans on time has helped lower my financial stress. The following are some simple tips I’ve learned that can alleviate financial stress and help college students manage their money.

1. Borrow responsibly. 

Federal Student Aid offers resources to help students understand the borrowing process. 

First, know how to read the financial aid package your school offers you. Be sure you can differentiate among grants, loans, scholarships, and work-study offers. You can do this by talking to the staff at your school’s financial aid office. Next, talk to your parents or those contributing to your education. Review the financial aid offer from your school, and look at your family’s finances, to decide which aid to accept or turn down. This is important in calculating how much you need to borrow in order to afford your education. You do not need to accept the full amount of loan money that’s offered to you; and understanding that concept will leave you with less debt in the future.

2. Budget carefully.

Budgeting is vital to lowering stress. By adopting responsible budgeting habits, you’ll learn planning skills to help manage multiple priorities and prepare for the future. Healthy budgeting practices provide dual opportunities for money-saving and time-management techniques. Budgeting is a great financial foundation and can be a stepping-stone to handling greater financial responsibility, leaving lifelong benefits.

3. Repay on time.

Repayment is the final step of the student loan process and lasts long after you graduate. If you do your research, the repayment process can go a lot more smoothly.

One way to reduce your stress is to understand the different repayment plans. You might find that you meet the criteria for making payments based on your income. Use the Repayment Estimator to help you understand the different repayment plans and decide which one is best for you. Then contact your loan servicer to see how to apply for the plan that best fits your situation.

Another thing to be aware of is that there are certain loan forgiveness options, including one for those who work full-time in public service. Knowing who qualifies and how to apply can ease the stress you feel about your debt as well.

Lastly, know that forbearance and deferment (ways to postpone or reduce your payments) are options if special circumstances arise. Understanding what’s best for your situation and applying in a timely manner is something you need to be aware of and talk to your servicer about.

As the report says, “Postsecondary education is essential to the economic health of our nation and to the economic opportunity of many Americans,” and each of our personal financial decisions contributes to that!

Megan McCusker is a sophomore at Loyola University Maryland studying History and Spanish. She served an intern for U.S. Department of Education’s Office of Federal Student Aid.

8 Things You Should Know About Federal Work-Study

22 1.19 work-studyIf you’re looking for another way to pay for college, Federal Work-Study may be a great option for you. Work-study is a way for students to earn money to pay for school through part-time on (and sometimes off) campus jobs. Work-study gives students an opportunity to gain valuable work experience while pursuing a college degree. However, not every school participates in the Federal Work-Study Program. Schools that do participate have a limited amount of funds they can award to students who are eligible. This is why it is so important for students to fill out the FAFSA as early as possible, as some schools award work-study funds on a first come, first served basis.
Here are 8 things you should know about the Federal Work-Study Program:

1. Being Awarded Federal Work-Study Does Not Guarantee You a Job

Accepting the federal work-study funds you’re offered is just the first step. In order to receive those funds, you need to earn them, which means you need to start by finding a work-study job. Some schools may match students to jobs, but most schools require the student to find, apply and interview for positions on their own, just like any other job. It is important that students who are interested in work-study or who have already been awarded work-study contact the financial aid office at their school to find out what positions are available, how to apply, and how the process works at their school.

2. Not All Work-Study Jobs are on Campus

The availability of work-study positions includes community service options with non-profit employers, which means some work-study jobs are available for off-campus work. An example might be reading or tutoring for elementary children at local public schools. If you are curious about securing a community service work-study position, contact the financial aid office or the student employment center at your school.

3. Work-Study Funds Are Not Applied Directly to Your Tuition

Unlike other types of financial aid, work-study earnings are not applied directly to your tuition and fees. Students who are awarded work-study receive the funds in a paycheck as they earn them, based on hours worked, just like a normal job. These earnings are meant to help with the day to day expenses that students have and are not meant to cover large costs like tuition and housing.

4. Work-Study Jobs May Be Limited

You may still be able to work on campus without work-study if your school does not have enough work-study funds to cover all on-campus student employees. Many campuses offer jobs for students with or without work-study. Check with the student employment office on your campus to find out what is available.

5. Federal Work-Study is not Guaranteed from Year to Year

There are several factors that can determine whether or not you receive work-study from year to year. These include your family income or financial need, whether you used the work-study funds that were offered to you in a prior year, or how much work-study funding your school receives that year. Contact your school for specific awarding criteria if you are interested in work-study. Typically, students who file the FAFSA early (in January/February prior to the academic year) and answer on the FAFSA that they are interested in Federal Work-Study will have a higher chance of being awarded funds from the program.

6. Pay May Vary

Work-study jobs vary in qualifications and responsibilities, so the pay will depend on the job that you are hired to do. Pay may also depend on your school’s policies and/or the minimum wage requirements in the state.

7. Work-study Earnings Are Removed From Your FAFSA Calculation for the Next Year

One of the benefits of earning income through a federal work-study position is that those earnings do not count against you when you complete the next year’s FAFSA. Be sure to answer the question regarding how much was earned through work-study on your FAFSA accurately. If you do not know the answer, you can contact the financial aid office at your school for help. Some schools will send you a notice in early spring regarding your earnings from the last calendar year to help you file your FAFSA.

8. Hours Worked May Vary

How many hours you work each week will depend on the type of job you get and your employer’s expectations. Most student employment positions, however, will work around your class schedule and only require between 10-20 hours/week, but again – that can vary!

Chandra Owen, Training Coordinator in the Office of Financial Aid at Michigan State University, Justin Chase Brown, Director of Scholarships & Financial Aid at the University of Nebraska-Lincoln, and Karla Weber, Senior Advisor in the Office of Student Financial Aid at the University of Wisconsin-Madison

 

7 Options to Consider if You Didn’t Receive Enough Financial Aid

The reality of college costs is that many families find themselves struggling to pay the entire college bill, despite having already filed the Free Application for Federal Student Aid (FAFSA) and receiving federal, state, and institutional financial aid resources. If you find yourself in this position, here are some ideas to consider to help fill the gap between what your financial aid covers and what you owe the institution.

Federal Student Aid image

 

TIP: The financial aid office at your college is a great resource. If you didn’t receive enough financial aid, contact your school’s financial aid office. They can help you explore your options.

Scholarships

For those heading to college this fall, most scholarship decisions for the academic year have already been made. However, we recommend you begin a routine of searching and applying for scholarships regularly. You should first consider scholarships local to where you graduated from high school or live; try community, religious, and fraternal organizations. You may also consider businesses in your community or those that employ your parent(s).

Then, look for scholarship resources available statewide, especially from organizations with which you may have been involved or companies in your state that are in the field for which you plan to study.

National scholarships can be very competitive, but don’t let that keep you from applying. Ask your financial aid office or academic unit about institutional or departmental scholarships (decisions may have been made for this year, but ask how to make sure you don’t miss deadlines for next year!). With scholarship opportunities, it’s always important to be careful of fraud. If you are ever concerned about the legitimacy of a scholarship, your school’s financial aid office might be able to help you make the determination.

Part-Time Work

You may have been awarded Federal Work-Study, which at most schools still requires you to find the work-study position yourself. This can help you cover some costs throughout the semester since these funds are paid as you earn them through working. If you were not awarded work-study funds, most schools have other part-time on-campus positions that can help you with some college costs. Working part-time on campus can be beneficial to your educational experience. Be cautious of working too many hours if you can avoid it. Ask your financial aid office or career services office how to apply for on-campus positions.

Payment Plans

Your school’s billing office, sometimes referred to as the bursar’s office or cashier’s office, may have payment plans available to help you spread the remaining costs you owe the school over several payments throughout a semester. The payment plan can help you budget the payments rather than paying in one lump sum, possibly helping you avoid costly late fees.

Special Circumstances Reevaluation

Sometimes a family’s finances are not accurately reflected on the FAFSA because of changes that have occurred recently, such as job loss, divorce or separation, or other special circumstance. Schools are not required to consider special circumstances, but those that do have a process by which you can petition for a reevaluation of the information on the FAFSA. This process may require you to submit documentation, and the financial aid office will recalculate your eligibility, possibly resulting in a change of financial aid awards.

Additional Federal Student Loans

If you’ve exhausted all your free and earned money options and still need additional funds to help you pay for school, contact your school’s financial aid office to find out if you’re eligible for additional federal student loans. For example, you might have reached a level of increased student loan eligibility if you completed coursework after your college awarded your aid.

Federal Direct PLUS Loans: Also, if you are a dependent student and still need assistance, your parent can apply for a Direct PLUS Loan. Some schools use the application on StudentLoans.gov and others have their own application. The PLUS loan application process does include a credit check. If your parent is not approved, he or she may still receive a Direct PLUS Loan by obtaining an endorser (cosigner.) If a parent borrower is unable to secure a PLUS loan, the student may be eligible for additional unsubsidized student loans of up to $4,000 (and sometimes more.)

Emergency Advances or Institutional Loans

Sometimes you may have college-related costs, such as housing costs or other living expenses, before your financial aid is disbursed to you. Your school may offer an option to advance your financial aid early or offer a school-based loan program. Ask your financial aid office if this is an option and always make sure you are aware of the terms and conditions (such as interest rates or repayment terms) of your agreement.

Private or Alternative Loans

Some private institutions offer education loans that do not require the FAFSA. While we recommend federal aid first, we realize it does not always cover the cost, especially for pricier schools. These types of loans will almost always require a cosigner and usually have higher fees or interest rates depending on your credit. We encourage you to first ask your financial aid office if they have a list of lenders for you to consider, but not all schools maintain such a list. If not, you can search for lenders on your own, but compare products before making your choice: look at interest rates, fees, repayment terms, creditworthiness requirements, satisfactory academic progress requirements, etc.

Before making any final decisions on how to fill the gap between your aid and your costs, it is always recommended that you meet with a representative in your financial aid office to determine what campus resources might be available before going out on your own. It might also be possible that you still have the time to change some of your choices before the semester begins: Can you change the type of meal plan you chose? The type of housing? The number of classes in which you are enrolled? Check with campus officials to see if you still have time to select a different, more affordable option.

Justin Chase Brown is Director of Scholarships and Financial Aid at the University of Nebraska-Lincoln.

3 Options to Consider if You Can’t Afford Your Student Loan Payment

Frustrated man - 3 Things You Should Do If You Can't Afford Your Student LoansThe U.S. Department of Education offers a number of affordable repayment options for borrowers who are struggling to pay back their student loans. The important thing to remember about all the options below is that it’s completely free to apply! Also, if you ever have questions or need FREE advice about your student loans, you can always contact your Department of Education loan servicer.

1. Switch Your Repayment Plan

You may be able to lower your monthly student loan payment by switching to a different repayment plan. Use this calculator to compare what your monthly payment amount could be if you switched your plan.

If you don’t pick a different plan when entering repayment, you are automatically enrolled in the 10-year Standard Repayment Plan. However, many borrowers don’t realize that you can switch your plan at any time by contacting your loan servicer.

One of the most popular options for borrowers who are looking to lower their payments is the income-driven repayment plans.

We offer three income-driven repayment plans:

  1. Pay As You Earn
  2. Income-Based
  3. Income-Contingent

Benefits:

  • Your monthly payment will be a percentage of your income. Depending on the plan, that may be 10% or 15% of your discretionary income, or something else. What you ultimately pay depends on the plan you choose and when you borrowed, but in all cases, it should be something you can afford.
  • Your monthly payment amount will be lower than it would be under the 10-Year Standard Repayment Plan if you qualify to make payments based on your income. In fact, it could be as low as $0 per month!
  • Any remaining balance on your loans is forgiven if your federal student loans are not fully repaid at the end of the repayment period (20 or 25 years).

Income-driven repayment plans are a great option if you need lower monthly payments. However, like all benefits, there are also costs. All of these benefits will ultimately increase the amount of interest you pay over time. The income-driven repayment plans also have tax consequences for any forgiveness received.

Apply for an income-driven repayment plan now

If one of the income-driven repayment plans is not a good option for you, we offer other options. Your servicer can help you identify the best plan to fit your needs.

2. Consolidate your Student Loans

Loan consolidation can simplify your payments by combining multiple federal student loans into one loan. Consolidation can also lower your monthly payment.

Benefits:

  • Can lower your monthly payment by extending your repayment period (spreading your payment out over more years). The repayment term ranges from 10 to 30 years, depending on the amount of your consolidation loan, your other education loan debt, and the repayment plan you select.
  • Will allow you to qualify for additional repayment options. If you have FFEL or Direct PLUS Loans, consolidating your loans into a Direct Consolidation Loan will allow you to qualify for additional repayment plans, such as the Pay As You Earn or Income-Contingent Repayment Plans, that you wouldn’t have qualified for if you hadn’t consolidated.
  • Your variable interest rate loans will switch to a fixed interest rate. It’s important to note that consolidation will lock-in interest rates on variable-rate loans, but will not lower them further. This would be a benefit if, like now, interest rates are low.

The benefits listed could provide relief to some borrowers. However, it’s important that you also weigh the costs before consolidating. For example, because you’re restarting and possibly extending your repayment period, you’ll pay more interest over time. Additionally, you may lose borrower benefits, such as interest rate discounts and loan cancellation benefits, offered with the original loans.

Apply for a direct consolidation loan now

3. Postpone your Payments

Under certain circumstances, you can receive a deferment or forbearance that allows you to temporarily postpone or reduce your federal student loan payments.

Deferment and forbearance may be a good option for you if you are temporarily having a difficult time paying back your student loans. Deferment and forbearance are not good long-term solutions. If you think you’ll have trouble paying back your loans for more than a year or you’re uncertain, you should consider an income-driven repayment plan or consolidation.

Benefits:

  • You do not need to make student loan payments during a deferment or forbearance.
  • The federal government may pay the interest on your loan during a period of deferment. This depends on the type of loans you have.

Again, deferment and forbearance are not good long-term solutions for borrowers who are struggling to pay back their student loans. Some reasons why:

  • With a deferment, interest will continue to be charged on your unsubsidized loans (or on any PLUS loans).
  • With a forbearance, interest will continue to be charged on all loan types, including subsidized loans.
  • The interest you accrue during periods of deferment or forbearance may be capitalized (added to your principal balance), and the amount you pay in the future will be higher.

If you can, you should consider making interest payments on your loans during periods of deferment or forbearance

To request a deferment or forbearance, contact your loan servicer

If you need help deciding which of these options is best for you, contact your loan servicer. They can help you weigh the different options based on your unique situation.

Nicole Callahan is a Digital Engagement Strategist at Federal Student Aid.

Federal Student Aid PIN (1998 -2015)

Federal Student Aid PIN tombstone

Federal Student Aid PIN, known as PIN to his many friends, died on May 10, 2015, after a long life of public service. Born in Washington, D.C. in 1998, PIN immediately made his presence felt across the country as he helped students complete their FAFSAs electronically on the World Wide Web. For 17 years, PIN reduced the completion time of federal student aid applications by millions of hours. Success with the FAFSA led to an extended career spanning the entire student aid life cycle, ranging from the aforementioned FAFSA and the IRS Data Retrieval Tool, entrance and exit counseling, and signing Master Promissory Notes, all the way to loan history access on the National Student Loan Data System and—more recently—StudentAid.gov. PIN is survived by one child, FSA ID.

On May 10, 2015, we changed the way you log in to Federal Student Aid websites. Students, parents, and borrowers are now required to use an FSA ID, instead of a Federal Student Aid PIN, to log in. If you haven’t logged in to a Federal Student Aid website (such as fafsa.gov or StudentLoans.gov) since May 10, you will need to create an FSA ID before you can log on in the future.

Create an FSA ID here: StudentAid.gov/fsaid

Q: What is an FSA ID and why do I need one?

A: An FSA ID is a username and password you use to access your personal information on Federal Student Aid websites and to sign important documents.

Q: What happened to the Federal Student Aid PIN?

A: On May 10, 2015, after 17 years of dedicated service, the PIN was retired to make way for the more modern and secure FSA ID.

Q: If I already submitted my FAFSA this year, do I already have an FSA ID?

A: The FSA ID replaced the PIN on May 10, 2015. If you submitted your FAFSA before that, you used a PIN. In order to do anything with your FAFSA or any other Federal Student Aid websites, you will now need an FSA ID. You can create one at StudentAid.gov/fsaid

Q: Who needs an FSA ID?

A: Students, parents, and borrowers who need to log in or interact with Federal Student Aid websites need an FSA ID.

Q: Can I make an FSA ID for someone else, such as my child or my parent?

A: No. Only the FSA ID owner should create and use the FSA ID. Why? The FSA ID is a legal signature that should be used only by its owner. If you don’t create your own FSA ID, then you may not be able to access the websites you need to get your financial aid!

Q: How do I get an FSA ID?

A: Go to StudentAid.gov/fsaid to create an FSA ID. If you have a PIN, then you can enter your PIN during the FSA ID registration process so that you won’t need to wait for the Social Security Administration to verify your information. But, if you don’t have a PIN or don’t have it handy, you can still create an FSA ID.

Q: Do I have to wait before I use my FSA ID?

A: You can use your FSA ID to sign and submit a new FAFSA right away. For other tasks, if you didn’t link your PIN when you created your account, you’ll need to wait one–three days for us to confirm your identity with the Social Security Administration. You’ll get an e-mail when this process is complete.

Q: What if I forget my FSA ID username or password?

A: Don’t worry. On our log-in pages, you’ll find links that give you the option of retrieving your username or password through your verified e-mail address or by successfully answering your challenge questions.

For answers to other frequently asked questions about the new FSA ID, go here: StudentAid.gov/fsaid.

Which Student Loan Repayment Plan Should You Choose?

If you graduated from college within the last six months, you have probably been contacted by one of the U.S. Department of Education’s loan servicers, reminding you that it’s almost time to begin repaying your student loans.

Your loan servicer will automatically enroll you in our Standard Repayment Plan unless you tell them otherwise. Under a Standard Plan, your payments will be fixed over a 10-year period of time.

But, this isn’t your only option. Did you know that the Department offers several different repayment plans? You can read more about that below or you can  try our repayment estimator to find out which repayment plan is best for you. Just log in, and the tool will pull your federal student loan information and allow you to compare our different repayment plans side by side:

Here are the details on each repayment plan we offer:

Repayment Estimator Graphic

Standard Repayment Plan

The most basic type of repayment plan is the Standard Repayment Plan. This is the default plan for most types of student loans. It breaks down your loan balance into monthly payments of at least $50 for up to ten years. In general, this is the plan that will cost you the least amount of money in interest payments.

Graduated Repayment Plan

Under the Graduated Repayment Plan, monthly payments start out low and increase every two years during the 10-year repayment period. This plan is best for borrowers whose income may start out low but is expected to increase. One downside is you will pay more in interest than you would under the Standard Repayment Plan.

Extended Repayment Plan

The Extended Repayment Plan allows borrowers with more than $30,000 in debt to extend the repayment period from ten years to up to twenty-five years. Payments under the Extended Repayment Plan can be either standard or graduated. This plan is best for borrowers whose loan burden is too large to bear the standard monthly payments over the course of just ten years.

Income-Based Repayment Plan

The Income-Based Repayment (IBR) Plan allows borrowers with a demonstrated financial hardship to limit their monthly loan payments to 15 percent of their discretionary income (that is, the difference between their adjusted gross income and 150 percent of the poverty guideline for their individual situation). Under this plan, if the balance of the loan has not yet been paid off after 25 years of payments, it can be forgiven. Under IBR, borrowers will pay more in interest over the life of the loan. This plan is best for borrowers who are struggling to afford their monthly payments under other repayment plans.

Pay As You Earn

The Pay As You Earn Repayment Plan allows new borrowers with a demonstrated financial hardship to limit their monthly loan payments to 10 percent of their discretionary income. Under this plan, if the balance of the loan has not yet been paid off after 20 years of payments, it can be forgiven. However, borrowers will pay more in interest over the life of the loan than under the Standard Repayment Plan. 

Income-Contingent Repayment Plan

Under the Income-Contingent Repayment Plan, a borrower’s monthly payment amount is calculated based on annual income and family size as well as his total loan amount. If a loan balance remains after 25 years of payments, it may be forgiven. Unlike the IBR and Pay As You Earn Repayment Plans, borrowers need not be facing financial hardship to qualify for this plan. However, a borrower will likely pay more in interest than in other repayment plans. This plan is best for borrowers who are not facing demonstrated financial hardship, but whose financial situation is insufficient to bear the monthly payments under other repayment plans.

Remember that these are for federal loans only. If at any point, you need advice or have questions about your federal student loans, don’t hesitate to contact your loan servicer. If you have private loans as well, be sure to check with your lender to see what repayment options they have available.

For more information on student loans and federal financial aid, visit StudentAid.gov.

4 Things You Need to Know About Repaying Your Student Loans


Click here for an alternate version of the video with an accessible player.

When it comes to repaying your federal student loans, there’s a lot to consider. But, by taking the time to understand the details of repayment, you can save yourself time and money. This should help you get started.

When do I begin repaying my federal student loans?

You don’t have to begin repaying most federal student loans until after you leave college or drop below half-time enrollment. Many federal student loans have a grace period. The grace period is a set period of time after you graduate, leave school, or drop below half-time enrollment before you must begin repaying your loan. The grace period gives you time to get financially settled and to select your repayment plan. Note that for most loans, interest will accrue during your grace period.

Your loan servicer or lender will provide you with a loan repayment schedule that states when your first payment is due, the number and frequency of payments, and the amount of each payment.

Whom do I pay?

The U.S. Department of Education uses several loan servicers to handle the billing and other services on federal student loans. Your loan servicer will work with you to choose a repayment plan and will assist you with other tasks related to your federal student loans. It is important to maintain contact with your loan servicer and keep your servicer informed of any changes to your address, e-mail, or phone number.

How much do I need to pay?

Your bill will tell you how much to pay. Your payment (usually made monthly) depends on

    • the type of loan you received,
    • how much money you borrowed,
    • the interest rate on your loan, and
    • the repayment plan you choose.

You can use our repayment estimator to estimate your monthly payments under different repayment plans to determine which option is right for you. Just remember, if you would like to switch repayment plans, then you must contact your loan servicer.

What should I do if I’m having trouble making my student loan payments?

Contact your loan servicer as soon as possible. You may be able to change your repayment plan to one that will allow you to have a longer repayment period or to one that is based on your income. Also, ask your loan servicer about your options for a deferment or forbearance or loan consolidation.

Still have questions?

If you need assistance with your federal student loan, it is best to contact your loan servicer. They can help you choose or change your repayment plan, and learn about other options to make your monthly payments more affordable. If you have any questions, don’t hesitate to contact your loan servicer.

Helpful Social Media Tools to Promote FAFSA Completion

Helpful Social Media Tools to Promote FAFSA Completion

For us at the U.S. Department of Education, the start of a new year provides a fresh opportunity to  remind parents, students and educators about the importance of submitting the Free Application for Federal Student Aid (FAFSA).  The Department’s Office of Federal Student Aid (FSA) provides more than $150 billion in grants, loans, and work-study funds each year to help pay for college or career school. Completing the FAFSA is the primary step for determining eligibility for federal student aid and subsequently accessing these funds. With the 2013-14 FAFSA application having gone live on January 1st, FSA’s Digital Engagement Group is requesting your assistance in promoting FAFSA completion.

We are asking for your help in getting the message out through your social media channels about the importance of completing the FAFSA early in the year.  To help you do that, we have developed some resources for you to use:

In addition, over the next few months, the Federal Student Aid Digital Engagement Group will be actively managing our own presence on social media with a strong focus on FAFSA completion. We highly encourage you to use and repost our content whenever applicable. Here are the places you can find us:

Thanks for your support and commitment to advancing the higher education goals of students and families across

3 Things to Do During Your Student Loan Grace Period

Student Loan Grace PeriodYour student loan grace period is a set amount of time after you graduate, leave school, or drop below half-time enrollment, but before you must begin repayment on your loan. The grace period gives you time to get financially settled and to select your repayment plan. Not all federal student loans have a grace period. Note that for many loans, interest will accrue during your grace period.

Here are three things you can do during your grace period to prepare for repayment:

1. Get Organized

Start by tracking down all of your student loans. There is a website that allows you to view all your federal student loans in one place. You can log in to www.nslds.ed.gov using your Federal Student Aid PIN to view your loan balances, information about your loan servicer(s), and more.

Note: Don’t forget to check to see if you have private student loans. The Consumer Financial Protection Bureau has a great Student Debt Repayment Assistant to help you learn about the repayment process, whether you have federal loans, private loans or both.

2. Contact Your Loan Servicer

loan servicer is a company that handles the billing and other services on your federal student loan. Your loan servicer can help you choose a repayment plan, understand loan consolidation, and complete other tasks related to your federal student loan, so it is important to maintain contact with your loan servicer. If your circumstances change at any time during your repayment period, your loan servicer will be able to help.

To find out who your loan servicer is, visit nslds.ed.gov. You may have more than one loan servicer, so it is important that you look at each loan individually.

3. Explore Your Repayment Plan Options

Although you may select or be assigned a repayment plan when you first begin repaying your student loan, you can change repayment plans at any time. Flexible repayment options are one of the greatest benefits of federal student loans. There are options to tie your monthly payments to your income and even ways you can have your loans forgiven if you are a teacher or employed in certain public service jobs. Work with your loan servicer to determine which repayment plan is right for you.

 

Five Things to Know About Your Student Loans

Over the next few months, many students who graduated or left school in the spring of 2012 will reach the end of their grace period and start repaying their student loans. Now is a great time to brush up on the basics of student loans.

student loans logoFinancial aid comes in many forms. Grants and scholarships are often called “gift aid” because they don’t have to be repaid. Another form of financial aid is work-study.  Federal Work-Study provides part-time jobs for undergraduate and graduate students with financial need, allowing them to earn money to help pay education expenses.

Student loans are the other major form of financial aid. A loan is money that a student borrows and must pay back, so it is important that you understand your options and responsibilities.

Here are five things you should know about your student loans:

1.     Federal vs. Private Loans

Federal loans are managed and backed by the U.S. government.  These loans are designed to provide students with fair treatment.  Because they offer the best terms for borrowers, federal loans are the best option for students.

Private loans are managed and backed by private banks.  These banks are not subject to the same rules and regulations of federal loans, and may feature higher (or variable) interest rates, stricter repayment plans and penalties, or other terms that may make them more expensive.

You also may encounter other, less common types of loans, such as state loans (managed by your state) or institutional loans (managed by your college or university).  In all cases, carefully read and understand the loan terms before deciding to accept.

2.     Unsubsidized vs. Subsidized Loans

Federal loans can be either subsidized or unsubsidized.  A subsidized student loan means that the government pays the interest for you while you’re in school, as long as you’re enrolled at least half time.  That means that if you take out a $5,000 subsidized student loan to pay for your freshman year, and graduate in four years of full-time classes, you’ll still owe $5,000 when you graduate.  Interest will only “accrue,” or be added to the repayment amount, after you stop being a student.

An unsubsidized student loan means that interest “accrues” even while you’re in school.  Some federal loans and nearly all private loans are unsubsidized.  You don’t always have to pay the interest while you’re a student, but the total amount you’ll need to repay is still growing.  If you have an unsubsidized student loan, it’s a good idea to pay the monthly interest while in school, even if you don’t need to.

3.     Loan Interest Rate

The interest rate is a percentage that determines how much your loan balance increases each year.  Consider it the price that you pay for being able to borrow money from the lender.  For example, if you have a $5,000 loan with a 5 percent interest rate, your annual interest will be $250 (5% x $5,000), which means at the end of the year you will owe $5,250.

4.     Loan Length of Repayment

When you start repaying a loan, you have a set amount of time to repay your loan known as the length of repayment.  A longer length of repayment means a lower monthly payment, but it also means a higher total amount repaid over the life of the loan.

Federal loans typically follow a ten-year repayment plan schedule, but depending on the type of repayment plan, your length of repayment could last as long as thirty years.  One key benefit of Federal loans is the ability of the borrower to switch repayment plans without penalty.  If you find a given repayment plan too difficult, research your options regarding extended repayment plans to determine if one is right for you.

5.     Monthly Loan Payments

The principal, interest rate, and length of repayment of a loan determine your monthly loan payment.  This is the amount you’ll need to pay each month.  Each loan has a separate monthly loan payment, so if you have more than one loan, you will have to pay several loan payments each month.  If you prefer to have a single loan payment, you should consider researching the Federal Loan Consolidation program to see if it’s right for you.

You may find that the monthly loan payments are too high and that you cannot pay them all.  If this occurs, seek help.  Research options such as income-based repayment, the public service loan forgiveness program, loan deferment, or loan forbearance to determine if one is right for you.  Remember, however, that options designed to decrease your monthly loan payments may increase the total amount you have to repay over the life of the loan.

Loans have many different characteristics, but they don’t have to be confusing.  Always carefully read and understand a loan’s features before accepting it. Your loan servicer or financial aid counselor can be great resource if you need help understanding the terms of a loan. Additionally, The Department of Education offers a number of tools, such as our repayment calculators and the Financial Awareness Counseling Tool (FACT), to help you research your options. By educating yourself, you will be prepared to make the best decisions for your own future.

#AskFAFSA Office Hours with Secretary Arne Duncan

On October 12th at 4pm ET, Secretary of Education, Arne Duncan will join @FAFSA to answer your financial aid questions during the October edition of #AskFAFSA Office Hours. Maybe you have a question about completing the FAFSA or understanding your loan repayment options? Maybe you want to know more about the new resources we just launched? If you have a financial aid question for Secretary Duncan, now’s your chance to ask!

AskArneEvent_PosterHere’s how it works:

  • Have questions for @ArneDuncan You can start submitting your questions on Twitter and Facebook today. Be sure to include the #AskFAFSA  hashtag in your tweets. We will be monitoring for questions on Facebook and Twitter from now through Friday.
  • On Friday, October 12th, at 4pm ET, follow @FAFSA or the #AskFAFSA hashtag on Twitter to join the conversation. Arne will be answering your questions live. Don’t use Twitter? You can also follow along using the Twitter app on our Facebook page.
  • Can’t make the live session? A summary of #AskFAFSA Office Hours, including the full Q&A, will be posted on Storify following the event.