Managing Loan Debt
Managing Student Loan Debt
Welcome to our managing student loan debt page, we will be discussing how to effectively manage your student loan debt. This page will provide important information and links to outside resources, it is important that students frequently visit these resources to help keep track of accumulating debt and evaluate the various options for paying back their debt.
Only borrow what you need
Many students take out student loans without considering how much they actually need to take out. We recommend every student who is considering a loan, to use our personal budget sheet. If you are unclear on how to use this budget sheet or need more information about your financial aid, please contact our Financial Literacy Advising Specialist in the financial aid department at firstname.lastname@example.org or 707-476-4183. Don’t forget loans that are being taken out at College of the Redwoods, are being counted towards your undergraduate cap for a bachelor’s degree. We recommend staying below $15,000 in loan debt at CR, otherwise you could potentially be using up more than 50% of your loan cap for an undergraduate degree.
Estimate your payments every time you consider a loan
Each time you take out a new loan, estimate your payments so you can see how manageable your loan debt is. You can visit: https://studentloans.gov/myDirectLoan/repaymentEstimator.action You can login to the repayment estimator and it will pull in your current student loans and you can manually add future loans. You will be able to see the estimated payments for each repayment plan once you have added your loans.
I just took out a student loan, what now?
The Department of Education will email you with your loan servicers name and contact information. This email will be sent to the email address you used with your FAFSA. If you cannot find this email, you can check nslds.ed.gov or studentaid.ed.gov to check your loan status, accumulated debt, and who your loan servicer is. If you are having difficulties finding who your loan servicer is, please contact our Financial Literacy Advising Specialist in the financial aid department at email@example.com or 707-476-4183.
Once you know who your loan servicer is, create an account on the loan servicer’s website. Please check that the information they have on file is correct, if you move frequently or change your phone number, make sure to update your contact information with your loan servicer and through your webadvisor at College of the Redwoods.
Helpful Videos about Student Loan Repayments
Consider making payments early
While you are not required to make a payment until you graduate or drop below 6 units, there is a benefit to making early payments. Do you know what interest capitalization is? If you have an unsubsidized loan, your loan started to collect interest as soon as it was paid out to you.
“Interest starts to accrue (grow) from the day your loan is disbursed (sent to you or your school). At certain points in time—when your separation or grace period ends, or at the end of forbearance or deferment—your Unpaid Interest may capitalize. That means it is added to your loan’s Current Principal. From that point, your interest will now be calculated on this new amount. That’s capitalized interest.”-SallieMae
To prevent the interest from capitalizing, you will need to make payments on the interest as it accrues or pay off the total interest before your grace period ends. Otherwise, when your loan goes into repayment after your grace period has ended, the principle balance will not be the original amount you took out, instead it will be the original amount + interest accrued before your grace period ended.
Most loan servicers provide an interest rate discount for setting up recurring payments, setting up payments earlier could reduce the long term cost of your loan.
I cannot afford my loan payment, what do I do now?
If you have kept your loans in good standing, but are finding that your payments are too high or you won’t be able to make a payment in the future – contact your loan servicer right away!
There are options and they will keep your loan in good standing.
- You can request a different repayment plan such as an income based repayment plan, which could lower your payments to as low as $0 a month.
- You can request to defer your payments for a period of time. For instance maybe you just got a new job, but it’s going to be a couple of months before you will have extra money to start making your loan payments. You can request to defer your payments for a few months, to give you time to get everything straightened out.
- You can request forbearance, this allows you to defer payments because of financial hardship.
For more information on deferment and forbearance please visit: https://studentaid.ed.gov/sa/repay-loans/deferment-forbearance
What Happens If I Default?
It is extremely important that you keep your loans in good standing or you could end up defaulting on your student loans. Defaulting on a student loan will prevent you from receiving financial aid at any institution nationally. It will affect your credit and prevent you from purchasing a vehicle, a home, or qualifying for a line of credit. If you think you may be in danger of defaulting on a student loan, contact your loan servicer right away or reach out to our Financial Literacy Advising Specialist.
To learn more about loan default, please visit our loan default page HERE.
I think I qualify for Loan Forgiveness or Discharge, How Do I Find Out?
There are a ton of options for loan forgiveness or discharge for students to pursue. The first step is always to apply and see if you meet the criteria during the application process. If you need assistance applying for loan forgiveness or discharge, please contact our Financial Literacy Advising Specialist. We have already compiled a comprehensive list of common loan discharge and forgiveness programs, please check them out HERE.
Financial Literacy Advising Specialist: