1.6 million people are about to start repaying their student loans––a number that’s likely to tick up to two million by year’s end.
With borrowers graduating with an average of $28,650 in student debt, the class of 2018 will begin repaying an eye-popping $57.3 billion this year. To put this number into perspective, that’s approximately the same amount of money earned by all 32 NFL teams over the last five years.
Most of these borrowers have their first student loan bill due this month. In fact, many of these loan payments are actually due on Thanksgiving day.
Unfortunately, some borrowers will be unable to afford their monthly payments––a reality captured by the fact that 8 million borrowers are currently in default on their loans.
If your first student loan bill is due this year, Summer wants to make sure that you’re set up for success. Our team––made up of student loan experts and borrowers ourselves––knows just how confusing the repayment process can be, especially when you’re first getting started.
Here are our top tips to know before you owe:
1. Track down all your loans
If your first loan payment is due this year, it’s critical to know which loans you borrowed. There are two main types of loans: federal and private. Federal loans are issued by the Department of Education after applying via the FAFSA form, whereas private loans are most commonly issued by banks and credit unions. It’s important to know the monthly payment, payment date, and the loan servicing company collecting payment for each loan you owe.
To find this information for your federal loans, visit the Federal Student Aid website. You can also create an account with Summer to see all your loans in one place. To track down your private loans, you can apply for a free credit report at annualcreditreport.com, which should list all loans borrowed in your name.
2. Keep track of your servicers
When it’s time to repay your loans, the lender assigns a loan servicing company (or “servicer” for short) to handle your payments and account details. Sometimes your lender and servicer are the same company, but it is likely they will have different names. It’s important to know your servicer and how to contact them.
Some borrowers have multiple servicers, so it’s important to look up which companies are collecting payments on which loans on the Federal Student Aid website. For private loans, you may have to call your lender to find out which company is servicing your loans.
Whenever any of your contact information changes, make sure to let your servicer know. Sometimes lenders will assign a new servicer to collect your loans and if your contact info is not up to date, you’ll run the risk of making payments to the wrong company––often resulting in late fees and other penalties.
3. Stay on top of your payments
If you have federal loans and miss any of your first 12 monthly payments or do not make them on time, there will likely be a financial penalty. If you have enough money in your bank account and your servicer allows it, consider setting up automatic monthly payments to reduce the likelihood of missing a payment. Many servicers even offer a 0.25% interest rate reduction if you set up auto-payments, which can save you in the long run.
If you’re struggling to make payments, consider enrolling in an Income-Driven Repayment plan, which can lower your monthly payments. If you’re unemployed right now, you might even be able to lower your monthly payment to $0/ month. Pay As You Earn (PAYE) is one of these income-based plans and will forgive your debt after 20 years of repayment.
Looking for more tips to save and navigate the repayment process? Read our in-depth guide for new borrowers here.