The Moans and Groans of Student Loans
Today, most college students have to get student loans to pay for higher education. Upon graduation, you have to start repaying those loans. This can be a daunting task in many ways. Here are some ideas that may make the process a little less painful.
- Remember the grace period. Thanks to the grace period built into most student loans, you’ll likely get from six to nine months after graduation before you need to begin repaying your loans. This time can allow you to get financially settled (at least partially) and examine your options before repayment begins.
- Understand your repayment options. Many lenders offer flexible repayment plans to help students manage this large financial responsibility. Common plans include: standard repayment, graduated repayment, extended repayment and income-based repayment. To pick the best option, you’ll need to determine the amount of discretionary income that you have to put toward your student loan each month. This, in turn, requires making a budget and tracking your monthly income and expenses.
- Ask about discounts. Some lenders offer special discounts for prompt loan repayment. For example, they may shave a percentage point off your interest rate if you allow them to automatically deduct payment from your checking account each month. Or, they may waive some monthly payments after receiving on-time payments for a certain length of time.
- Consider a deferment, forbearance or loan cancellation if you can’t pay. At times, you may find it financially difficult or impossible to repay your student loan. The best thing that you can do is contact your lender and apply for a deferment, forbearance or cancellation of your loan. You’ll need to fill out the appropriate application from your lender, attach any supporting documentation and follow up to make sure that your application has been processed correctly.
- Keep track of your paperwork. Repaying student loans is a serious matter, and you’ll need to stay on top of it. It’s important to keep accurate, accessible records. Open a file folder for each loan, and file any accompanying paperwork there, such as copies of promissory notes, coupon booklets, correspondence from your lender, deferment and/or forbearance paperwork and notes of any phone calls.
- Investigate the student loan interest deduction. On the bright side, you might be able to deduct some of the student loan interest that you pay on your federal tax return. If you paid $600 or more of interest to a single lender on a qualified student loan during the year, you should receive Form 1098-E at tax time from your lender, showing the amount of student loan interest you’ve paid for the year. For more information, see IRS Publication 970 or call you ShindelRock tax advisor.
A little planning may simplify your life after college. We’re happy to meet with any new (or not so new) college grad to make sure you’re making the most of the student loan deduction and help you work out a repayment schedule that works with your life.