Student Loan Repayment Guide

In a perfect world, students would never be required to pay back the student loans they take out. Instead, they could use the money to cover the cost of their education, and when they graduated, they could simply run away with the money and never look back. In reality, however, students who borrow money are required to pay that back. For some students, repayment poses a problem.

Common Difficulties

In order to pay back their student loans, graduates must have jobs. It’s an obvious point, but unfortunately, many students find it difficult to land a good job after graduation.

If only half of graduates have full-time jobs, this might seem to indicate that many more might struggle to make their monthly student loan payments. Without money coming in, they might find it hard to put money into a bill payment each month.

Those who do get jobs might also struggle, however, as their first jobs might net them very small amounts of money, leaving little left over for bills.

employment status of college grads

Source: http://www.heldrich.rutgers.edu/sites/default/files/products/uploads/Chasing_American_Dream_Report.pdf

With this meager amount of money coming in, students might find it hard to cover living expenses, and adding a debt payment on top of those obligations can seem difficult or impossible. These students might also have other forms of debt that require repayment. Members of the Class of 2013 have quite a bit of debt: a 2013 grad with credit card debt owes, on average, $3,000; likewise, an average federal loan borrower owes $26,000, and so on.

avg debt and types of college grads

With this meager amount of money coming in, students might find it hard to cover living expenses, and adding a debt payment on top of those obligations can seem difficult or impossible. These students might also have other forms of debt that require repayment. Members of the Class of 2013 have quite a bit of debt: a 2013 grad with credit card debt owes, on average, $3,000; likewise, an average federal loan borrower owes $26,000, and so on.

Adding a student loan payment to these other loan payments could be quite difficult for some students.

Source: http://money.cnn.com/2013/05/17/pf/college/student-debt/


Making It Work

Even though paying back student loans can be incredibly difficult, a remarkable number of students manage repayment. In fact, the statistics regarding student loan default seem to demonstrate that most students manage to pay back their loans in a timely manner.

Only 1 in 10 federal student loan borrowers are in default.
one-ten-default
Source: http://www.huffingtonpost.com/2013/09/30/student-loans-default_n_4019806.html

But some students just can’t seem to make this sort of reasonable exercise work for them when they’re out in the real world and facing a significant amount of financial hardship. For students like this, investigating repayment options could be an excellent idea.


Federal Loans

These different payment plans can be helpful depending on a borrower’s financial situation, but unfortunately, research suggests that few students either know about or take advantage of these programs.

It pays for students to discuss their options with their financial aid professionals and federal loan servicers. The administrators of these loans are willing and able to help students enroll in different repayment plans in order to get the relief they need. In fact, some repayment plans only require a phone call or click of a button on a borrower’s online account to change plans.


Private Loans

While federal loans account for the majority of all outstanding student debt, there are many students who borrow from private lenders in order to cover college costs.

The Consumer Finance Protection Bureau suggests, for example, that $150 billion in outstanding student loan debt is in the form of private loans.

Private lenders aren’t required to offer the same payment plans as federal loan programs. Policies vary from lender to lender, but in general lenders will work with borrowers to offer some sort of alternative payment plans if the borrower demonstrates financial hardship. It benefits the lender to accommodate a borrower, at least to a degree, as the lender doesn’t benefit when a borrower defaults.

Private Loan Repayment

In general, it’s best to avoid these problems by being open and honest, and paying debts as quickly and as fairly as possible.

Paying off student debt is an intimidating process, but with the proper amount of attention and planning, borrowers can navigate repayment without too much difficulty. For more resources on managing debt and repayment, continue to browse our site, and even check out our resources regarding student loan consolidation.


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