Navigating New Student Loan Rules: Essential Tips to Save You Money
Confused about the changes to student loans and repayments? You’re not alone. With evolving rules and potential repayment challenges on the horizon, it’s crucial to understand how these adjustments can affect your financial future. Finance expert Elaine Rubin, who spent seven years at the U.S. Department of Education’s Federal Student Aid office, offers essential tips to help you manage your student loans wisely.
1. Know Your Numbers: Gather Your Loan Information
The first step toward effective loan management is to understand exactly what you owe.
- Pull out Your Paperwork: Gather all documents related to your student loans. Create a simple summary that includes:
- Total amounts borrowed
- Current balances
- Interest rates
This knowledge is critical; many borrowers are surprised to find out when repayments start that their debt has grown due to accruing interest. Remember, most loans start accumulating interest as soon as they’re issued—except for subsidized loans.
- Review Your Repayment Plans: Check if you’re enrolled in the government’s Saving on a Valuable Education (SAVE) plan. Be aware of garnishment rules, especially with ongoing legal challenges regarding payment details from the Biden administration. Rubin points out that many borrowers don’t realize how their payment status can affect their overall debt picture.
2. Plan Your Repayments Wisely
With repayment status changing, it’s essential to strategize how you’ll approach repaying your loans.
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Use the Loan Simulator: This tool from the Department of Education can help you explore various repayment options. As interest rates are set to resume, knowing your choices can save you from unexpected surprises later.
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Adjust Based on Income: If your income has declined since 2020, don’t hesitate to report these changes. Lower income could qualify you for reduced monthly payments if you’re in an income-driven repayment plan, giving you a necessary break while you get back on your feet.
- Don’t Rely Solely on Forgiveness: While some borrowers may be eligible for student loan relief, Rubin cautions not to count on forgiveness as a sure thing due to ongoing legal obstacles.
For public service employees, such as teachers and nurses, be aware of the Public Service Loan Forgiveness program. Meeting specific job and repayment criteria can lead to significant debt cancellation.
3. Pay Off Interest While in School
If you can, make efforts to pay off interest that accrues before your loans enter repayment.
- Small Contributions Matter: Even if money is tight, try to chip away at the interest while still in school. While most loans allow a grace period before payments begin, tackling interest early can drastically reduce your overall debt once you graduate.
Wrapping Up
Taking informed steps now can save you thousands in the long run and make the transition to repayment smoother. By understanding your loan details, planning your repayments strategically, and tackling interest early, you’re setting yourself up for better financial health as you navigate post-college life. Start with these tips, and you’ll be better equipped to handle the complexities of student loans.
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