During your college career, you may have been reminded by an instructor that there are no dumb questions. If something isn’t clear, it’s always a good approach to raise your hand and ask for clarification.
Today’s student loan borrowers may want to take this advice to heart because it is easy to get things wrong about student loan debt. Here are five seemingly silly student loan questions that aren’t so silly after all:
- Do I really have to pay off my student loans?
- Who is my student loan manager?
- How can I find my interest rates?
- If I can’t afford my student loan repayments, can I reduce them?
- Can I combine all of my student loans?
Do I really have to pay off my student loans?
Yes. Borrowers agree to repay their student loans when they sign up to receive them.
Most current federal student loan borrowers have benefited from the longest federal student loan payment freeze in history. First mandated by the federal CARES law in March 2020, the administrative forbearance is expected to end on January 31, 2022. Affected borrowers should be ready to resume their student loan payments in February.
Loan cancellation can be an option for full repayment. It pays to keep abreast of the overhaul of the Public Service Loan Forgiveness Program, known as PSLF, by the US Department of Education. Teachers, nurses, first responders, the military, people working in nonprofit hospitals, and other nonprofit and public workers can potentially have their federal student loans canceled.
The changes to the PSLF, announced in October 2021, extend previous limits with eligibility regarding loan type, repayment options, and loan payment history. To find out if you can take advantage of the program changes, visit StudentAid.gov.
When it comes to private student loans, each bank or other lender has their own policy regarding payments and how they will attempt to collect you if payments are late or you are in default.
Who is my student loan officer?
Student Loan Administrators are the organizations that handle the payment and administration of your federal student loans. Sometimes loan officers change, sometimes more than once. It is likely that borrowers who take out a combination of federal and private student loans over the years will have multiple loan management agencies.
A good place for borrowers to find a loan manager is the National Student Loan Data System. The centralized listing is a single resource for the entire lifecycle of federal loans and grants, from financial assistance approval to disbursement, repayment, deferral, default and closure.
For private student loans, start with your credit report, which tracks current and past credit obligations, including student loans. You should be able to find the name of your private lender (s) there. Go to AnnualCreditReport.com for a free report from the three major credit bureaus: Equifax, Experian, and TransUnion.
How can I find my interest rates?
As with other loans like mortgage financing and auto financing, the interest you pay to a lender is the cost of the loan. The interest rate on your student loan varies depending on the type of loan, such as whether it was an undergraduate or graduate student loan.
The total interest you will end up paying includes other conditions such as when the funds were first paid to you and how long it takes you to pay off the loan. Once the interest rate on a loan is established –
like a federal student loan or a private fixed rate loan – that will not change.
To find interest rates on Federal Student Loans, visit NSLDS and follow the MyStudentData download login instructions to access these details and more.
The interest rates for private student loans are set by the lender. To follow the interest rates on these, contact each lender to find out the specifics of your loans. Private student loans offer fixed and variable interest rates, which you should watch on your statements to maintain an accurate monthly budget.
If I can’t afford my student loans, can I reduce them?
Managing student debt is about affordability. Based on your current monthly income and expenses, you may find that continuing to pay for federal student loans or resuming them after a deferral or forbearance period is a challenge.
Be sure to explore your options for lowering your monthly payments on eligible federal student loans by switching to an income-based repayment plan. It starts with filling out an application and recertifying your information for a lower payment than you can better afford.
Although the new monthly payments are lower, interest will continue to accrue. If it takes you longer to pay off your student loans, your total debt repayment will be higher.
There are no income hardship requirements, so most federal student loans may qualify for one of the types of income-based repayment plans. Ineligible loans may become eligible if the borrower consolidates them under the Federal Direct Loan Consolidation Program.
If you can’t afford your private student loans, talk to your lender. They don’t usually offer income-driven plans, but they can offer alternative repayment options on a case-by-case basis. Keep in mind that they have no obligation to do this, but want their money. Defaulting on your loans is the last thing you want in this situation.
Can I combine all of my student loans?
One of the benefits of consolidating your student loans is the convenience of just one monthly payment. This makes it easier to manage the payment over the long term. Another advantage is that you may be able to replace all of your variable rate loans with a fixed interest rate, which makes budgeting easier.
But beware of the drawbacks.
For most borrowers, consolidation lengthens the repayment period. So your cost of borrowing will actually be higher since you will likely pay more interest in the long run. Any unpaid interest on consolidated loans will be calculated with the original principal balance of your consolidation loan, called capitalization, which means that interest will accrue on a higher principal balance than if you had not consolidated.
Also, be sure to consider how the consolidation might affect your eligibility for the Income Incentive Repayment Plan or Civil Service Loan forgiveness program.
Overall, mastering these basic questions will allow you to be successful while paying off your student loan debt. Each person’s financial situation is unique. To manage your specific challenges when considering your budget and full financial situation, you can find a national accredited nonprofit organization specializing in this area as a useful resource.