The Post-Grad’s Guide to Managing Student Loan Debt (Part II)

Did you miss part I of Christina’s guide? 
See it here.

Between day-to-day expenses and other debt obligations (think credit cards or auto loans), student loan payments can get pretty overwhelming, even for the savviest budgeter. Here are two more tips to consider if you need help making sense of it all.

4. If you encounter financial hardship and cannot make your monthly payment, call your lender immediately.

Do not wait until you are late on your loan payments before you contact your lender; instead, be proactive. For federal loan(s), you have several repayment options — one allows you to make lower payments based on your income level. Certain career fields allow for loan forgiveness, as well. Use the Federal Student Aid website to inquire about jobs within these fields and the loan repayment options they offer.

In addition, inquire with your lender about the deferment and forbearance options that come with your loan(s). Deferment allows you to temporarily postpone making your monthly payments, while forbearance allows you to temporarily reduce the amounts of your monthly payments. Borrowers must meet specific qualification requirements to benefit from these provisions (in most cases, they must be dealing with some form of financial hardship). Typically, these options are offered by federal loan lenders only; however, many private loan lenders are trying to mirror the benefits offered by the Federal Direct Loan Program to stay competitive in the marketplace, so be sure to ask your lender if this option applies to your private loan.

5. Look into loan consolidation as a way to reduce your interest rate or simplify to one, monthly loan payment.

Loan consolidation allows you to combine your outstanding loans into one loan, based on new terms and conditions set forth by a new loan application and promissory note. Here are the situations where loan consolidation might be beneficial:

— You have variable interest-rate loans and want to consolidate them into a fixed-rate loan;

— You have high interest-rate loans, but now qualify for a lower interest rate, because you’ve built your credit standing over time by staying consistent on your loan payments;

— You have many loans with various payment due dates to keep track of, and you want to simplify and consolidate to one monthly due date.

In most cases, loan consolidation makes more sense for borrowers with private loans than for borrowers with federal loans. However, if you have federal loans and want to look into consolidation, refer to the Federal Student Aid website. Keep in mind that you cannot consolidate your private loans in a federal loan consolidation program; however, you can consolidate your federal loans with your private loans through a private lender. Be careful, though — you may lose attractive terms with your federal loans if you consolidate them with a private lender.

Before you decide to consolidate, make sure you understand what you are giving up, in terms of your deferment or forbearance options, borrower benefits and prepayment/repayment options with your lender or servicer.

To recap, the key to managing (and paying down) your student loans successfully is having a plan in place. Know what types of loans you have, the terms and conditions for each loan, and how to effectively pay them down. If you can afford it, try to pay off your loans as quickly as possible to reduce the amount of interest you will pay over time; but don’t pay them off at the expense of increasing other lines of debt to finance your living expenses.

Most importantly, secure a monthly amount that you can pay comfortably so that you’re keeping pace with due dates to avoid incurring late fees and/or going into default. If you find that your monthly payments are overwhelming, call your lender immediately to seek further guidance.

 

Hewins Financial Advisors, LLC d/b/a Wipfli Hewins Investment Advisors, LLC (“Hewins”) is an investment advisor registered with the U.S. Securities and Exchange Commission (SEC) under the Investment Advisers Act of 1940. Hewins is a proud affiliate of Wipfli LLP. Information pertaining to Hewins’ advisory operations, services and fees is set forth in Hewins’ current Form ADV Part 2A brochure, copies of which are available upon request at no cost or at www.adviserinfo.sec.gov. The views expressed by the author are the author’s alone and do not necessarily represent the views of Hewins or its affiliates. The information contained in any third-party resource cited herein is not owned or controlled by Hewins, and Hewins does not guarantee the accuracy or reliability of any information that may be found in such resources. Links to any third-party resource are provided as a courtesy for reference only and are not intended to be, and do not act as, an endorsement by Hewins of the third party or any of its content or use of its content. The standard information provided in this blog is for general purposes only and should not be construed as, or used as a substitute for, financial, investment or other professional advice. If you have questions regarding your financial situation, you should consult your financial planner, investment advisor, attorney or other professional. Hewins does not provide tax, accounting or legal services.
Christina Gann Munguia
Christina Gann Munguia

CFP®, MSFP | Associate Advisor

Christina Gann Munguia is an Associate Advisor for Hewins Financial Advisors in Redwood City and San Francisco, CA. Christina primarily focuses on financial planning for women and emerging investors.

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The Post-Grad’s Guide to Managing Student Loan Debt (Part II)

time to read: 3 min