March 28, 2014 by Latasha Myers
Google Hangout With CFPB hosted by Higher Education Advocates Provides Tips on Managing Student Debt
On Tuesday, Young Invincibles and StudentDebtCrisis.org hosted a Google Hangout on the “Top 5 Tips for Tackling Your Student Debt.” Rohit Chopra, of the Consumer Financial Protection Bureau, offered some of his best tips for managing student loan debt. In case you missed the great conversation, here’s a brief recap of some of the advice offered:
1. Know What You Owe
It’s important that students know exactly how much they owe and who they owe. Chopra tells students that they can check the national student loan data system at www.nslds.ed.gov for a listing of all your federal student loans, including Perkins, Stafford, and Plus loans. And for those of you with private loans, a good thing to keep in mind is that by law, everyone has access to three annual free federal credit reports — one from each of the major credit reporting agencies. These credit reports will list all of your debt, including that from private student loans. It is best to check these regularly to make sure everything is order, and since you get three free reports a year, it’s wise to check them every four months. To access your federal credit report, go to AnnualCreditReport.com. Likewise, you can call your school’s financial aid office, and they will usually have a record of all of your student loans.
2. Don’t Avoid; Ask
If you are worried that you cannot make a payment, don’t just throw away those pesky letters in the mail. Call up your loan servicer or school financial aid office, and see how they can help. Even if you have private loans that generally have fewer favorable repayment options and higher interest rates than federal loans, your loan servicer may have programs that can help you manage your payments.
3. Sign Up for Discounts and Benefits
See if you qualify for a lower payment plan that might lead to forgiveness, like Pay as You Earn or Income-Based Repayment. These plans allow you to cap federal loan payments based on a percentage of your income. For private student loans, go online and research options for other types of repayment plans or benefits that will save you money. If your private student loan servicer does not have that option listed online, don’t give up; write to them.
4. Be Savvy About Applying Payments
Be smart when making payments or applying extra payments to the principal of your loan. As a general rule of thumb, choose the loan that has the highest interest rate to apply the extra payments to, as this will save you the most money. And don’t forget to double-check to make sure that your loan servicer is actually applying your payments how you intended. There have been concerns from students in the past about extra student loan payments not being applied to their loan, and instead they were advanced into a “paid ahead” status, meaning that the extra payments were applied to their next month bill. Taking away a borrower’s ability to pay ahead means that interest rates will continue build up on any unpaid amount, forcing the student to pay back larger debts for a longer period of time. So, don’t assume your payments are automatically allocated to the loan with the highest interest. Call your loan servicers or check online to confirm that all your payments are being applied to the loan you.
5. Check for Options to Refinance Your Student Loan
It’s always a good idea to see if you can refinance your student loans and get a lower interest rate, especially for those of you with older student loan debt.
Surprise! One more tip: If You Think You’ve Been Wronged, Take Action! Call your loan servicer, write a letter, and if all else fails, file a complaint with the Consumer Financial Protection Bureau.