Student Loan Debt and 6 Strategies to Keep Your Loans Up to Date

Almost all working professionals I know have a student's loan weighing them down. In this economy it is very important that you pay attention to your student's loans. The US Department of Education now has the power to reach into your bank accounts and garnish your wages and tax returns without a court order if for one reason or the other you fall behind on your loan payment. Below are 6 strategies to help keep you on the straight and narrow path with your student loan debt.

o Choose The Right Repayment Plan
o Pay On Time
o Keep In Touch With Your Lender
o Notify Lender Of Difficulties
o Consolidate Your Loans
o Postpone Repayment

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Choose The Right Repayment Plan

Most loans will require that you start paying it down once you leave school and get a job. Depending on your situation you should choose a repayment plan that best fits your needs. If you are looking at reducing your monthly payment there are certain options available to you and they include extending your payment terms, going on the interest only based payment plan or going with the income only based payment plan. Talk to your lender to find out other plans they have and the best one for you.

Pay On Time

To avoid late fees, a hit on your credit score and maybe save yourself some money, it is always a good idea to pay your loans on time. The best way to ensure that your payments get to the lender when they are due is to pay electronically. This way the lender takes their money directly and it's never late. Other benefits you get include not spending money on stamps which could add up over time. Some lenders will actually reward you for paying on time by reducing your interest rate. Always ask your lender for any perks they have, you never know what they are offering that would be of benefit to you.

Keep In Touch With Your Lender

Whenever you move or change addresses endeavor to inform your lender about such a move so that they can update the information they have on you. It is in your best interest that all communication channels remain open and they are able to get in touch with you when they need to.

Notify Lender Of Any Difficulties

If for any reason you think you will be missing a payment, get in touch with your lender and inform them before hand. Most of the time, the lender should be able to accommodate you and allow you a grace period for things to improve at your end. Consequences of default are quite significant. It could lead to legal action against you, garnishment of your wages or salary, a dent on your credit and maybe inability to get loans and credit in the future.

Consolidate Your Loans

Consolidation is the process of combining your loans so that instead of having several payments to make every month you only have one. In some cases consolidation can actually reduce your interest rate. Consolidation is a reasonable option for students and individuals with student loans, but it should be dealt with on an individual by individual basis. The factors which are usually considered when one wants to consolidate include the amount of credit the person has available, changes in financial circumstances and the individuals debt to credit ratio.

It is a good idea for individuals with several loans from different institutions and different types of loans to consolidate to simplify payment, while students with loans from just one source are better off not consolidating. Another down side to consolidation is the time it takes you to pay off the loan. If you have a 10 year cycle to pay off your loan and you have paid say 3 years into your cycle, when you consolidate it starts all over from the beginning.

Postpone Repayment

Sometimes emergencies, difficulties and other circumstances arise and you cannot continue to make your loan payments on a regular basis. There are two options available to you; Forbearance and Deferment.

Deferment allows a borrower to postpone loan repayment for a specified period of time. You are usually required to complete a deferment form and the condition you could be allowed to defer you loans include re- enrollment in school, economic hardship and unemployment. As long as you are in school, your loans are in deferment, but other conditions like unemployment and hardship have a three year limit. Forbearance allows you to temporarily suspend or reduce payment due to financial difficulty for a specified period. Forbearance is normally for a year, but could be increased on yearly increments. During both forbearance and deferment the loan continues to accrue interests.

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