By Ryan Laspina
Analyst, Red Flags and External Reviews at APUS
Federal Student Aid (FSA) loans provide many students with the necessary funding to reach their educational goals. However, national student loan debt has ballooned to trillions of dollars, because many students are not prepared to immediately pay back their loans after they finish school and their grace period expires. But there are various actions you can take now to avoid future financial problems.
Know Your Rights and Responsibilities as a Borrower
Before you take on student loan debt, read through any materials given to you or that are required such as entrance counseling, exit counseling and your loan agreement (Master Promissory Note). These documents outline your rights and responsibilities associated with student loan borrowing.
Contact Your Loan Servicer
The first step in successfully repaying your student loans is to establish a relationship and communicate with your loan servicer. The loan servicer can provide you with information on loan amounts and repayment options, and also answer a variety of other questions.
Choose a Loan Repayment Plan
There are numerous repayment plans and your loan servicer can help you select the plan that best fits your current budget. There are plans that allow you to pay fewer, larger payments to get your loans paid off more quickly; plans that are based on your current income; and standard plans that follow a 10-year repayment cycle.
Create a Budget and Stick to It
Budgeting should go hand in hand with selecting your repayment plan. Select the repayment plan that best reflects your current budget and goals.
Also, consider setting up an automatic bank withdrawal for your payments. This is a great way to stay on top of your payments. It requires you to regularly balance your bank account and ensure there is always enough money to make your monthly payment.
Explore Other Loan Repayment Options
If you reach a point in your life when you cannot repay your student loans, talk to your loan servicer to see what options you have. Many loan servicers offer forbearances, which serve as a temporary relief from loan repayments. There are other solutions available that keep borrowers from declaring bankruptcy or defaulting on their student loans.
The best resource for you when you’re creating your loan repayment goals is your loan servicer. Share your goals for maintaining a healthy budget and good credit with him or her. You should have an open dialogue with your loan servicer from the start and communicate your financial changes as soon as they occur.