By Alexa Clark ’14 and Jackie Yamanaka ’13, Contributing Writers
Although the thought of repaying student loans may seem overwhelming, it is common to graduate with student loan debt. Student loans are also considered a “good debt” because it is one of the best investments you could possibly make. On average, college graduates make more than those who only graduate from high school, according to Ramit Sethi’s book “I Will Teach You to be Rich.”
At Scripps, financial aid recipients will most likely have subsidized or unsubsidized Federal Stafford loans, Parent Loans to Undergraduate Students or Federal Perkins Loans. To qualify for a Federal Stafford Loan, students must be U.S. citizens or permanent residents, enrolled half time in school, and demonstrate financial need. Federal Perkins Loans are available to all U.S. citizens or permanent residents who are enrolled at least half time in school.
After graduation, a few steps are necessary to take. First, know what you owe and how much you borrowed. Next, determine how much you can afford to pay each month. You should then choose a repayment strategy. Make sure you know the terms and conditions of your loan. Finally, keep in touch with your lender and loan servicer. Remember that you have one six-month grace period that begins when you graduate, go below half-time enrollment, or withdraw from school. In some cases, you loan may have a nine- month grace period.
How much money you are required to pay towards your loan every month is determined by a formula. However, if you can afford to pay any additional money, no matter how large or small, you will pay off your loan quicker. This means you will be able to invest sooner.
If you find that your loans are past due, do not ignore your statement and bills. Make sure you contact your lender or loan servicer immediately. There are options for temporary relief and repayment strategies. Deferment is a temporary suspension of loan payments for specific situations. Forbearance is a temporary postponement or reduction of payments when you are experiencing financial difficulty.
Here are some frequently asked questions about student loans.
What if I don’t earn enough money to make the full monthly payment on my loans?
-Contact your lender.
-Federally sponsored loans give you a lot of options (e.g. temporary relief, flexible repayment plans, etc.).
Why is it that my loan amount seems to keep growing?
-Loan balances grow due to accruing interest, especially if you miss a payment.
What happens when I don’t pay my loan?
-You will receive collection calls. -Remember, you signed a master promissory note. -After 270 days, you are in default, which means wage garnishment, seizure of tax refunds, lottery winnings, social security, etc.
What does student loan delinquency mean?
-Loan delinquency occurs when you are late making your scheduled payments.
-Your credit report will reflect your loan delinquency, which makes it harder to borrow money and increases your interest rate.
What does student loan default mean?
-Student loan default means you have not made a monthly payment in 270 days.
-Your lender may request immediate payment in full.
-It will be harder to borrow money because it is listed on your credit report.
-You will be subject to wage garnishment and occupational license suspension.
-You will also be ineligible for future federal student loans and other federal assistance.
If I don’t have money to make my monthly payments, what can I do to avoid delinquency?
-You have three options: deferment, forbearance or flexible repayment plans.
-Talk to your servicer and explore these options.
-Often, they are quite reasonable, but they will probably want at least a little bit of repayment.
Please join us for our next workshop on credit cards, credit scores and identity theft on Dece. 3 at 1 p.m. in Humanities 121.
If you have any question, feel free to stop by our dorm office hours, which are the first and third Tuesday and Wednesdays of every month from 8 to 9 p.m. Our next office hours will be Dec. 6 and 7 from 8 to 9 p.m. in the Frankel living room.
For more information concerning repayment plans or general questions about student loans, please contact Money Wise Women Mentors at MWWM@ScrippsCollege.edu or Scripps’ Office of Financial Aid department at (909) 621-8275.