One of the happiest moments in most students’ lives is crossing the stage at commencement and receiving their degree. However, this joy can quickly turn into dread once a steady flow of notices start pouring in, announcing the first student loan payment is due. This can be the ultimate nightmare, especially if you have little knowledge of how to manage student loan debt.
Heather Jarvis, a student loan expert, once owed $125,000 in student loans from Duke University School of Law School and was facing 30 years of $1,200 monthly payments. Fortunately, Jarvis sought help and was able to pay off her debt through the school’s loan-repayment assistance program. As a result of her experience, Jarvis focused her professional work on reducing the financial barriers to practicing public-interest law. She also dedicated her professional efforts to advancing public-service loan forgiveness. Jarvis emphasizes that students who plan to depend on student loans to fund their education need to know the importance of managing that debt upon graduation.
“Realistically estimate how much you can afford and borrow no more than you need. The federal government has unparalleled collection powers so it’s important to stay on top of your loans,” warns Jarvis.
As of July 1, the interest rate for federal student loans doubled from 3.4% to 6.8%. However, Jarvis says federal loans are still less expensive and less risky than private loans. She also says deferring student loans isn’t the best option.
“Deferment gets expensive because interest adds up over time. The income-based repayment options can provide an affordable alternative.”
Student loan borrowers can also receive help from the Consumer Financial Protection Bureau. The CFPB offers guidance to borrowers seeking tips on dealing with debt collectors or reporting violations made by loan servicers. The CFPB posted sample action letters on its website for borrowers to consider using when corresponding with debt collectors.
Jarvis says the CFPB advocates fairness for and transparency in the system and provides excellent information for student loan borrowers.
“You can log complaints if you encounter problems with lenders, servicers, or collection agencies,” Jarvis says. “They also have some great tools for understanding your options.”
The letter topics range from requesting more information on debt, to filing complaints, to notifying a loan servicer where and when to contact the borrower. The CFPB will respond to complaints made by borrowers within 15 days and settle any complaints within 60 days.
Here are four tips from Jarvis on how to manage your student loans:
Get a clear inventory of your debt by visiting the National Student Loan Data System.
Consider income-based repayment plans if needed.
Understand that the longer it takes you to repay your loans, the more you will pay in interest over time.
Avoid private student loans whenever possible; look first to federal loans.