Student Loans: 5 Horrible Mistakes

By Ian Acosta on June 29, 2017

Many college students carry student loans debt on their backs as they leave school. The amount and duration of the repayments can seem daunting, intimidating, and very surreal. Not only is there nagging pressure to find a job out of college, the government expects reparations for what helped you get your degree in the first place.

These five mistakes will hopefully keep you on the straight and narrow and out of any danger zones when it comes to repayment.

Forgetting about your loans

Probably a pretty obvious mistake here, but a mistake nonetheless. Do not forget about any debts you owe, especially your student loans. Keep track of which loan is through which lender and the balance, repayment status, and payment schedule for each loan. A helpful site is www.nslds.ed.gov. On this site, you can log in and track your loan amounts, the lenders they are through, and the repayment schedule and plan for all federal loans.

If you do not see certain loans listed, they may be private loans not provided by the government. If you think you may have a loan that is not listed on the site, call your school to find out. It is their job to keep track of these things to not only help you but to make sure they receive their money.

Not knowing about grace periods

Learn these! Now!!! Grace periods are very important when it comes to repaying loans. Unsurprisingly, different loans have different grace periods to go along with them. Just so there is no confusion, a grace period is how long you can wait after leaving school to make your first payment on the loan.

Typically for loans that are either subsidized or unsubsidized by the government, the grace period is six months but can vary. My recommendation is to go to studentaid.ed.gov for a more detailed breakdown of grace periods for various types of loans. You do NOT want to miss that first payment!

Doing little to no research on repayment options

Without looking it up, do you know what type of standard payment plan you are put on as soon as you start paying your loans? If you said anything other than a 10-year plan, you might want to research a bit more on this very important financial obligation that you now owe. Were you aware that you can alter the frequency and amounts of your payments? Look that up also.

A drawback to extending the 10-year plan is that you will eventually end up paying more in interest even though your monthly payment will be lower. Different types of structured repayment plans are income-based repayment and Revised Pay As You Earn. These payments vary based on your income and have different structures to them based on which option would best fit your situation. For private loans, the repayment can be different as well. However, the point is this: you owe it to yourself for now and in the future to research.

Not paying the highest interest loans first

Say you have multiple loans and you have run into some money. You want to pay one of the loans down drastically as to speed up the process of getting this gigantic burden off your back. Which one should you pay off first? The one with the highest interest rate. Why is this? The short answer: to save more money.

The more technical explanation is due to the fact that the more interest you have on ANY type of loan, the longer it will take to pay off the loan. This is because most of your payment goes toward paying off the interest that accrues on the loan instead of paying down the principal on it. Think of the principal as the heart of the loan and the interest as everything around it. You need to strike the heart as much as possible to kill it, aka your loans. I am telling you to kill your loans. Seriously though, work out an order in which to pay off your loans starting with the highest interest rate loan first!

Ignoring loan payments altogether

As you can probably gather, this is not the most prudent or financially savvy move on your part. This will KILL your credit rating in the future. What does that mean? Well, when you need to take a loan out on anything else in the future, such as a house, car, credit card, you will get saddled with ungodly high-interest rates.

After nine months of non-payment, you will be considered to have defaulted on your loan. In that instance, the entire balance comes due. Not only that, the interest will only grow and you could be subject to garnished wages. If you are in danger of default, talk to your lender right away to avoid this dangerous situation.

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