Borrowing money is almost always easier than paying it back! If you are using student loans to fund your education, the decisions you make when applying for aid just might make repayment a lot easier. If you make wise financial choices, you may be able to limit your loan debt, by only accepting the amount of loans that is absolutely necessary for school expenses (rather than the full amount you are eligible for).

Borrowing student loans responsibly isn’t just about the choices you make when applying for aid; the financial decisions you make every day can help make repayment more affordable, too. Compare two students’ financial decisions and see how it affected their monthly student loan payments.

And make sure to scroll to the bottom of the page for smart borrowing bonus tips and additional iGrad resources!

(Click infographic to view as full-size image)

(Click infographic to view as full-size image)

Bonus Tip #1: If you have unsubsidized loans, interest is accruing on these loans while you are in school. If you pay the interest on any unsubsidized loans while you are in school, you’ll not only save money on your future repayment bills, but you’ll be forming the healthy habit of making those payments once you finish school.

Bonus Tip #2: Use iGrad’s student loan calculator to figure out whether you’ll be able to comfortably afford repayment in the future based on your expected monthly income.

Let iGrad Help You Be a Smart Borrower

These additional, multi-media iGrad resources will provide you with even more helpful information on how to be a smart borrower and give you some tips on how to responsibly manage your student loans! Check them out below!

Video

• Smart Borrowing and the Future of Repayment: As a student loan borrower, it is important to remember that borrowing money is always easier than paying it back. Our Smart Borrowing video series shows you how even a few simple strategies can translate into more manageable student loan repayments...
• The Cost of Borrowing Money: In this clip from our Best Student Loan Repayment Strategies webinar, student loan expert Heather Jarvis teaches the basics of smart borrowing, the effect of interest on borrowed money, and how you can apply this knowledge to decrease your loan debt...
• iGrad Guide: How to Access Your Student Loans on NSLDS: Learn how to access your federal student loans and grants with iGrad's video guide to the National Student Loan Data System (NSLDS)! Our guide will have you easily maneuvering through the NSLDS site, prepared to ask any questions you may have...
• Financial Literacy: Financial Aid and Other Ways to Pay for College: Although you may incur some debt to pay for school, educate yourself before signing on the dotted line for student loans. We go over all the basics, from filling out your FAFSA to finding federal grants and scholarships (aka "free money") to help you afford your degree!

Articles

• Smart Borrowing: Limit Your Loan Debt: The most critical step in applying for student loans is determining the right loan size. Taking the full amount for which you are eligible is often unnecessary and financially unwise. Find out how much you should borrow in student loans...
• Financing College: Use Free Money First: While a college education is expensive, there are a number of means available for paying for it. However, it is important to understand which kinds of funding are the best sources for you and your family to use. Here's what you need to know…
• What Are My Options When Repaying Student Loans?: Before entering repayment it is a smart idea to estimate your expected monthly payments so you know if you can afford them. If they seem too high for your budget, consider these other loan repayment options to find a better fit for your needs…
• Repayment Plans: Breaking Down the Options: One size does not have to fit all when it comes to loan payment plans, so it's nice to know there are different options available. We've broken down each one in specific detail to help you find a repayment plan that best fits your situation...

Calculators

• Loan Payments Calculator: If you take out a loan, it is very important that you understand all of your financial obligations, such as your repayment plan. Use the details of your loan terms to calculate how much your loan payments should be in order to pay them back on time...

• Student Loan Calculator: When you're shopping for a loan, you should look at the total amount of interest you will pay on the loan. This calculator is a handy tool to help you compare loans.

What strategies are you using to be a smart student loan borrower? Share them with us in the comment box below!

From the moment you accept student loans as a form of payment to pay for your education you also become a responsible borrower. As a responsible borrower it is important to take the necessary steps to stay on top of your student loans and make sure you understand all the details of your loan agreement.

While you are in school it is crucial that you keep track of what you are borrowing and how much your payments will be based on the amount you have accepted. By keeping track of these two things you will have a good understanding of what your balance will be once you are done with school and how much your monthly student loans payments will be once you enter repayment.

Make sure to keep all important documentation regarding your student loans in a safe place where you know you can always find it.

Who Can Answer Your Student Loan Questions?

While in school, if you have questions about disbursements and/or loan amounts, if you need to update your contact information, or if you have a change in your school status, you will want to contact your financial aid office. It is always best to contact your lender as well if you need to update your personal information. Questions on any interest paid on your unsubsidized loans will need to be directed at your lender.

If you are done with school, and you have questions on how much you owe, about a bill, or you need to update your personal information, you will want to contact your lender and your servicer. Another way to find out how much you owe in federal student loans is to go to www.nslds.ed.gov. You will be able to view all of your disbursed student loans there as well. If you have a dispute with your lender or servicer you may contact the federal student aid ombudsman.  

Please refer to our list of key student loan contacts. Should you have any private loans you will want to contact the servicer or lender with whom your loans are with.

How to Stay on Track With Your Student Loans

As we've mentioned, one of the most important parts of staying on track with your student loans is knowing who (and how) to ask when you have questions. This infographic gives a visual breakdown of this essential information: who to stay in contact with, while in school and after you graduate, as well as the key student loan contacts and how to get in touch with them. Check it out!

(Click infographic to view as PDF)

(Click infographic to view as PDF)

Let iGrad Help You Manage Your Student Loans

These additional, multi-media iGrad resources will provide you with even more helpful information on how to be a responsible borrower and teach you some smart ways to manage and stay on top of your student loans! Check them out below!

Videos

• How to Access Your Student Loans on NSLDS: Learn how to access your federal student loans and grants with iGrad's video guide to the National Student Loan Data System (NSLDS)! Our guide will have you easily maneuvering through the NSLDS site, prepared to ask any questions you may have...
• What is a Student Loan Servicer?: In this clip from our Best Student Loan Repayment Strategies webinar, student loan expert Heather Jarvis reviews the student poll result answers to the question, What is a student loan servicer?, and explains the importance of knowing your servicer...

Articles

• Oh No! My Student Loans are Due: When you first borrowed money for school, repayment seemed like a distant concept, but now graduation has come and gone and it is time to repay your federal student loans. Not sure how? Have a million questions? Enter NSLDS with all your answers...

• Getting to Know Your Student Loan Servicer: Do you know who your student loan servicer is? If not, you should! Your servicer is important to know—they handle everything to do with your federal student loans. We take the guesswork out of getting to know your servicer by sharing essential contact information about the most common servicers...

• What Are My Options When Repaying My Student Loans?: Before entering repayment it is a smart idea to estimate your expected monthly payments so you know if you can afford them. If they seem too high for your budget, consider these other loan repayment options to find a better fit for your needs…

• Breaking Down the Repayment Options: One size does not have to fit all when it comes to loan payment plans, so it's nice to know there are different options available. We've broken down each one in specific detail to help you find a repayment plan that best fits your situation...

Calculators

• Loan Payments Calculator: If you take out a loan, it is very important that you understand all of your financial obligations, such as your repayment plan. Use the details of your loan terms to calculate how much your loan payments should be in order to pay them back on time...

• Student Loan Calculator: When you're shopping for a loan, you should look at the total amount of interest you will pay on the loan. This calculator is a handy tool to help you compare loans.

Misc. Resources

• Glossary: Federal Student Loan Terms (A-F)
• Glossary: Federal Student Loan Terms (G-N)
• Glossary: Federal Student Loan Terms (O-Z)

What strategies are you using to help manage your student loans? Share with us!

Have you ever wondered what level of income you’ll need in order to comfortably make your student loan payments? Or maybe you have an expectation of what your income will be and are interested in learning about how much student loan debt you can take on with your expected salary. If these questions sound familiar, our Student Loan Affordability Calculator can help you get a better understanding of your situation. 

Here are strategies to keep in mind.

Obtaining a Student Loan

First look into your eligibility for grants and scholarships.

Many students qualify for some aid, so start by filling out the Free Application for Federal Student Aid (FAFSA) on the U.S. Department of Education’s Web site at www.studentaid.gov. You can learn more about the FAFSA and grant opportunities at that same site.

Know how much you need to borrow and that you can make the monthly payments.

Your anticipated costs (tuition, textbooks, housing, food, transportation) minus your education savings, family contributions, income from work-study or a job, scholarships and/or grants will help determine how much you may need to borrow. Again, your goal should be to limit the amount you borrow, even if you are approved for a larger loan, because the more you borrow, the more money you will owe.

Also consider the minimum you will owe each month to pay off your loans, including interest, after you graduate and how it compares to your projected earnings. To help you project your future salary in the lines of work you’re considering, look at the U.S. Department of Labor’s statistics on wages in more than 800 occupations (www.bls.gov/oes). Your monthly repayment amount also will generally depend on your interest rate and the term of your loan, which can vary from 10 years to more than 20 years.

“Even though most student loans won’t require you to begin monthly payments until after you graduate—generally six to nine months later—a student loan is a serious commitment,” said Matt Homer, an FDIC Policy Analyst. He noted, for example, that many adults who borrowed more than they could afford to repay have faced serious debt problems for many years following their graduation. Unlike some other loans, federal and private student loans generally cannot be discharged through bankruptcy. Borrowers who fail to pay their student loans could be referred to debt collection agencies, experience a drop in their credit score (which will make credit more expensive and perhaps make it harder to find a job), and have a portion of their wages withheld.

If you need help deciding how much to borrow, consider speaking with a specialist at your school (perhaps a school counselor at your high school or an admissions or financial aid officer at your college). A college budget calculator also can be helpful, and you can use one from the Department of Education.

Consider federal loans first if you need to borrow.

Experts say that, in general, federal loans are better than private student loans, and that you should only consider private loans if you’ve reached your borrowing limit with federal loans. Why? The interest rates on federal loans are fixed, meaning they won’t change over time. But the interest rates on private loans, which are often significantly higher, could be either fixed or variable (they can fluctuate). Federal student loans also offer more flexible repayment plans (see below) and options to postpone your loan payments if you are having financial problems.

When You Are in School

Set up direct deposit for your student aid money.

Although some schools or financial institutions may encourage you to select a certain debit card or prepaid card for receiving part of your student loan or other aid (the part left after your school has subtracted tuition and fees), carefully weigh all of your options. School-preferred products may come with high fees and inconvenient ATM locations. Remember that you can always deposit federal loan proceeds anywhere you choose.

Keep track of the total amount you have borrowed and consider reducing it, if possible.

For example, if your loan accrues interest while you are in school, you may be able to make interest payments while still in school, and this can reduce the amount owed later on. You could also repay some of the principal (the amount borrowed) before the repayment period officially begins.

Paying Off Your Loan

Select your repayment plan.

Federal loans offer a variety of repayment options and you can generally change to a different repayment plan at any time. For example, one type of loan starts off with low payment amounts that increase over time. Another is the “Pay as You Earn” program that the Department of Education will soon make available, in which your monthly payment amount will be 10 percent of your “discretionary” income (defined by the Department’s regulations but generally what you have left over after paying key expenses). In addition, it may be possible to have any remaining balance forgiven after 20 years of payments. In contrast, private loans generally require fixed monthly payments over a period of time.

With federal loans you also may qualify for special loan forgiveness benefits if you pursue certain careers in public service. Remember, though, that the longer you take to repay any loan, the more you pay in interest (although in some cases you may receive a tax benefit for the interest you pay).

Make your loan payments on time.

“Student loans are typically reported to credit bureaus, so paying on time can help build a good credit history, and paying late can harm your credit history,” said Elizabeth Khalil, a Senior Policy Analyst in the FDIC’s Division of Depositor and Consumer Protection. To help you stay on schedule, consider having your payments automatically deducted from your bank account or arranging for e-mail or text-message reminders.

Also, make sure your loan servicer—the company that collects your payments and administers your loan—has your current contact information so you don’t miss important correspondence, such as a change in a due date.

Consider making extra payments to pay down your loan faster.

If you are able to, start by paying the student loans with the highest interest rates. If you have more than one student loan with a particular servicer, make it clear that you want to apply any extra payments to reduce the balance of the higher-rate loans.

Look into refinancing opportunities.

You may be able to obtain a lower interest rate and even consolidate multiple loans of the same type into one loan. However, be aware that if you refinance or consolidate a federal loan into a private loan, you may lose important benefits associated with the federal loan (such as loan forgiveness for entering public service). In some cases, even consolidating one type of federal loan into a different kind of federal loan can result in lost benefits.

Contact your loan servicer immediately if you’re having difficulty repaying.

Repaying student loans can be challenging, especially during tough economic times. “Remember that if you have a federal student loan that you’re having trouble paying, you have options that could help. Private loan borrowers may be able to get some assistance as well,” noted Jonathan Miller, Deputy Director in the FDIC’s Division of Depositor and Consumer Protection. To learn more about student loans, start at www.studentaid.ed.gov.

Source: FDIC.gov

"Taking Out" the Right Amount

These days, most students require some form of student loans to fund their college or graduate school education. The most critical step in applying for student loans is determining the right loan size for your specific needs and financial well-being.

Taking the full amount of loans for which you are eligible is not always necessary and does not always make financial sense (especially now that some loans, namely Stafford Loans for graduate school students, will accrue interest while you are attending school, beginning July 1, 2012). Borrowing money is always easier than paying it back; a little research and consideration can go a long way in ensuring that your student loan repayments are reasonable and manageable upon graduation from school.

Research Your Educational Costs

After determining how much money you are eligible to borrow for school, determine exactly how much you will need. In addition to tuition costs, you will likely need to consider the costs of housing, transportation, food, and other living and school-related expenses. Identify ways in which you can save in each of these areas, while researching additional sources of money for your education, such as grants, financial aid, scholarships and work-study programs. 

iGrad's got a few great resources that can help in this regard: check out our Top 4 Tips For Graduating Debt Free and our Grants & Scholarships Guide. Once you’ve determined how much your college experience will cost after using all other sources of payments for school, borrow only as much money as you will need.

Student Loan Repayment Calculator

Research Your Future Cost of Living and Income

In addition to considering the costs of your education, it is helpful to consider the cost of living you anticipate after graduating, as well as your expected income. Where do you expect to live after graduating? Will you need to buy a car after college? How much, on average, do professionals make in your field of study? Obviously, a lot can change over the course of your education, but having a rough idea of your future income and costs of living can inform just how much money is appropriate to borrow for school. iGrad's got a great guide to "Student Loan Repayment on a Budget" here. Check out the chart (below) for an idea of how much you will end up paying and how much your monthly payments will be, based on a fixed 6.8% interest rate.

As parents and students are making decisions about their financial aid packages, most likely, those packages will include some form of student loans–either Stafford or Perkins. Colleges also provide parents and students with private loan options to supplement the government aid when necessary.

No one wants to graduate from college loaded with debt, yet 60 percent of college students and their families borrow money each year to cover ever-rising tuition and fees, according to American Student Assistance. That’s because the average private college charges close to $40,000 a year for tuition, fees, room and board, while state universities average just over $17,000 a year. Out-of-state students at public four-year schools fall halfway between those costs, averaging just under $30,000 for the 2011-2012 school year, cited US News & World Report.

Financial aid—merit-based and need-based scholarships, grants, work-study programs and loans—has become a reality for the majority of college students.

A New Way of Life

The process of finding aid begins with completing the Free Application for Federal Student Aid (FAFSA) to determine expected family contribution (EFC) based on family income and expenses. There are 63 universities in the U.S. that claim to meet 100 percent of students’ financial need, as determined by the FAFSA. The cold hard truth is that the majority of students don’t attend these colleges and will need some form of financial aid.

Protect Yourself

While working through the process of acquiring funding for college, remain mindful of identity protection. Your soon-to-be college student can be especially vulnerable to identity theft because his or her personal data is easily accessible through grade postings, credit card applications and online transactions, according to the Department of Education.

Here are some ways to protect the identity of your student:

• After completing the FAFSA, log off the page and close your browser.
• Don’t use paid financial aid services that operate over the Internet or by telephone. The Department of Education offers its services for free and pages containing your private information are password-protected.
• Do not reveal the FAFSA personal identification number (PIN) to anyone, even if that person is helping you fill out the form. The only time you should use your PIN is on secure websites.
• Shred receipts and copies of documents with student identity information if they are no longer needed.
• Review financial aid award documents and keep track of the amount of student aid applied for and awarded.
• Make sure your student reports all lost or stolen identification (such as your student ID card) immediately.

Forgiveness

When your child graduates, the payoff amount on the loan may seem crushing. But your child has options: student loans, especially those connected to postgraduate professional education, sometimes can be paid off through public service. In 2007, Congress created the Public Service Loan Forgiveness Program to encourage individuals to work full-time in public service jobs. Borrowers who have made at least 120 payments on eligible federal student loans may qualify for forgiveness of the remaining balance while employed full-time by certain public service employers, according to StudentAid.gov.

If public service isn’t an option, loan repayments can be accomplished more easily by paying off private student loans before paying off federal loans.

Be Smart

Only borrow what you can afford to repay. There are numerous sites that provide student loan repayment calculators. Know your repayment options before you borrow and educate yourself on student loan repayment. Research salaries for your career and estimate using entry-level figures.
 

This article was reposted with permission from ParentsCountdowntoCollegeCoach.com

Student loan delinquency hit its highest point in the final quarter of 2012, with the New York Federal Reserve reporting that 11% of all student loan balances are delinquent for 90 days or more. This is the worst delinquency rate yet; and student loan delinquency rates actually surpass that of credit card, loans, and other mortgage payment delinquency averages. The rate is showing no signs of abating, and appears to be increasing over time. Student loans may be the next problematic focus for private and government lenders.

The trouble lies in the fact that most students are ill-informed regarding their loans and this lack of information has led to poor choices and decisions with regard to loan payment.

Here are some fallacies surrounding student loan delinquency.

1.) Only Dropouts Become Delinquents

There is the common assumption that students who graduate won't default or become delinquent in paying off their student loans because they have the means to do so. Though it is true that students who graduate are less likely to default, 20% become delinquent payers in the first five years. More importantly, the job market isn't exactly robust, resulting in less jobs available and lower pay for those who do find employment, making regular loan payment difficult.

2.) Student Loan Debt is "Good" Debt

There is a big difference between "good debt" and "bad" debt, and a lot of students (and parents) believe that it's okay to be in debt for education since it's possible to recoup and is best considered an investment. Unfortunately, the current economic climate has student debt higher than a graduate's potential salary, causing delinquency which in turn allows the debt to balloon further.

3.) Delinquency is Better than Defaulting

This mentality has indirectly contributed to the increase in student loan delinquency, as borrowers assume that it is okay to be delinquent with payments as long as they do not default. In truth, delinquency has its own negative effects, including a disastrous credit rating that could impact the borrower's record for good. The consequences of delinquency can be just as severe as the consequences of default and you want to do everything possible to prevent both.

4.) Student Loan Borrowers Can Declare Bankruptcy

Most consumer loans are protected by the bankruptcy clause, but not student loans. Borrowers cannot get rid of their student loans—both federal and private—by filing for bankruptcy. Once you borrow a student loan, you are stuck with that debt until you can either pay it down yourself or find a loan forgiveness program. Forbearance and deferment are temporary options, as is loan consolidation, but bankruptcy is not.

5.) Borrowers Know What They Are Doing

This is the biggest and most dangerous fallacy of all. Most student borrowers enter into agreements without even understanding their financial options. Most do not realize the difference between federal and private student loans, leading to problems in payment later on. Smart borrowing is the best, and only, way to borrow, and borrowing smart means being informed about your options.

Sources: Forbes.com; WashingtonPost.com