Have to Take Out a Student Loan? Keep These Tips in Mind to Stay on Track and Pay Them Off
Following these tips can help borrowers stay the course when trying to get out of debt
Many student loan borrowers do their best to pay off their debts, but they often do not have the information and help they need when circumstances make it hard to do so. Fortunately, there are tips they can follow to stay on track when things get hard.
Make Sure You Know Who Your student loan Servicer Is
The first thing every borrower should know is who their loan servicer is—the company that sends the bill every month. Loan servicers are private companies responsible for managing borrowers' accounts, processing their monthly payments, and communicating with them directly. Borrowers experiencing any kind of financial hardship, such as unemployment, should contact their servicer and find out about alternative repayment plans and any available options for loan deferment or forbearance.
Follow these steps to find your student loan servicer:
- Look over your monthly statement listing how much you owe on your loans. Your loan servicer should be listed on this statement, as well as contact information for reaching representatives.
- For federal student loan borrowers, get the name and contact information for your servicer by logging into your "My Federal Student Aid" account.
- For those with private student loans, check your credit report, which you can get a free copy of at AnnualCreditReport.com.
Know who your servicer is? That's a good first step. Next, follow these tips to help keep yourself on track to pay off your loans on time.
- Protect yourself as well as your money by providing your servicer with specific instructions on how to allocate any extra payments you might make.
- If you're having a hard time making monthly payments on federal student loans, you have the right to apply for a repayment plan to adjust the amount of your payments based on your income.
- Are you a veteran or service-member? Make sure that you understand the rights, protections, and resources available to you as a student loan borrower as well as a member of the military community.
- Did you co-sign for a student loan? Make sure you understand your rights and responsibilities.
- Submit a complaint if you have trouble with your student loans or your loan servicer.
- Stay away from debt relief scams.
In cases in which borrowers have many loans associated with the same servicer and the borrowers do not give instructions about allocating payments greater than the amount due, the servicer usually decides how to allocate them. You can save hundreds of dollars or more in interest—and possibly pay off your debt faster—by giving the servicer instructions on how you want this extra money allocated.
Borrowers with federal student loans can choose among several different repayment plans offered by the Department of Education, including income-driven repayment (IDR) plans that can adjust the amount you pay monthly to as little as 10 percent of your discretionary income.
Borrowers with private student loans should contact their servicers and ask what options are available. Many companies say that they offer alternate payment programs for borrowers unable to make full payments. You can keep from falling further behind on your payments by asking for help when you start having trouble.
Service-members have many options when it comes to paying off student loan debt, ranging from IDR plans to zero percent interest on certain student loans due to service in an area of hostile fire. In addition, federal law enables veterans who have a disability connected to their service to seek discharge (forgiveness) of their federal student loans if the Department of Veterans Affairs gave them a 100-percent disability rating.
When you co-sign for a loan, you are not only vouching for another person's ability to repay the loan, you are also taking full responsibility for paying back the loan if that person doesn't or can't repay it. Co-signers are responsible for making the monthly payments and will be asked to pay if the primary borrower stops paying. If you're a co-signer, or if you have a student loan that someone else co-signed and you're in the process of repaying the loan, make sure you understand your options for releasing the co-signer.
Borrowers can submit a complaint about private student loans or about their federal student loan servicer with the Consumer Financial Protection Bureau (CFPB), which will forward the complaint to the company and work to get a response. You can submit a complaint either online or by calling the Bureau at (855) 411-2372.
Servicing problems can leave borrowers in trouble without the tools that can help them avoid defaulting on their loans. Student debt relief scams take advantage of these borrowers by charging them up-front fees while also promising to enroll the borrower in free federal consumer protections, such as ICR plans.
Though it is ultimately up to the borrower to repay student loans, following tips like these can help them stay on track even in hard times.