Graduation. No more all-night study sessions, term papers, or three-hour biology labs. But even though you finally get to leave Beowulf and differential equations behind, there’s one piece of your college career that may still follow you for a long time — your student loans.
How well you handle repaying your student loans can help establish you either as a responsible borrower or as one that creditors won’t do business with.
The Almighty Credit Score, which will be affected by your history of student loan repayment, can determine whether you pass or fail as a renter, a home buyer, a car owner, a job seeker, a credit card user — basically, as anyone who wants to avoid living at home, taking the bus to the unemployment line.
The Essentials of Repayment: What You Need to Know
You have repayment options. If you can’t find a job right away or you find yourself struggling to make ends meet, talk to your lenders about your repayment and postponement options. Most federal student loans have income-sensitive repayment options, as well as deferment and forbearance options that allow you to temporarily postpone your payments when you’re experiencing financial hardship, without hurting your credit score.
Know when your grace period ends. Don’t miss your first couple of student loan payments right off the bat just because you thought you had more time left in your grace period. With federal Stafford student loans, you have six months after you graduate, leave school, or drop below half-time enrollment before you have to start making payments. On federal Perkins loans, that grace period is nine months.
Keep your lenders informed. They can’t help you if they don’t know where you are. So keep your lenders in the loop about any changes to your name, address, telephone number, employer, or Social Security number. And always call them if you decide to go back to school, you lose your job, or you’re just having trouble affording your student loan payments.
Postponing Your Payments: When You’re in a Bind
For those times when you’re finding it hard to come up with the money you need to make your student loan payments, talk with your lender about your payment postponement options, which could give you some breathing room while you get back on your feet.
Deferment and forbearance periods may allow you to temporarily reduce your monthly student loan payments or postpone them altogether without going into default or negatively affecting your credit rating.
Deferment
Deferment allows you to temporarily stop making payments on your student loans. If you’re unemployed or experiencing economic hardship, you may be able to request a deferment on your federal loans, for up to a year at a time, up to a total of three years over the life of the loan.
You must contact your lender to request an unemployment or hardship deferment, and you may need to complete a deferment request form.
You’re also typically allowed to defer your payments on your federal student loans if you enroll in school again at least half time.
The government will pay for any interest that accrues on your federal subsidized loans during a deferment period, but you’ll be responsible for all the interest that accrues on your unsubsidized loans.
Forbearance
If you’re unemployed or experiencing economic hardship, you may be able to request a hardship forbearance, which allows you to temporarily reduce or postpone payments on your student loans.
You must contact your lender to request a hardship forbearance, and you typically need to complete a forbearance request form. You may also need to submit supporting documentation, depending on the nature of your request.
Generally, on federal student loans, a lender can grant a forbearance for up to a year at a time. Unlike unemployment or economic hardship deferments, there is no three-year cumulative limit on discretionary forbearance periods granted due to financial hardship.
When you’re in a forbearance period, unlike deferment, you’ll be responsible for any interest that accrues on your loans, whether those loans are subsidized or unsubsidized.
Interest that accrues while your loans are in forbearance will be added to your principal loan balance and capitalized. However, you can always choose to make interest-only payments while you’re in deferment or forbearance to avoid having interest added to your principal.