You can have control over your student loans, and your greater financial life, by gaining knowledge and understanding about them and combining that with the various aspects of your unique financial situation. This empowers you to take the necessary actions with confidence that you are pushing forward in the right direction.
It’s not fair, but you need to spend more time managing your money than those without student loans. If you’re willing to put in the time and effort, you can craft a student loan strategy that fits your unique situation. Creating and implementing this strategy will give you the freedom to pursue the life that you may otherwise feel is out of reach.
We’ll go step by step through a five-step system that will leave you with a solid plan and strategy for your student loans, as well as strategies you can use on a regular basis to continue to improve your financial life.
Step 1: The Starting Point—Know Your Loans
In step one, you will gather all your student loan information and put together a student loan snapshot. This snapshot will include necessary information for your student loan strategy. You will also learn about the different types of student loans, including consolidation loans, and the differences between them.
Step 2: The Possibilities—Understand Your Options
In step two, you will learn about your repayment options, opportunities for loan forgiveness, and tools such as refinancing, forbearance, and deferment. Having a full understanding of the options available to you is critical for feeling in control of your loans and confident in the choices you make. Student loan default is also covered, including how to get out of it and back on track.
Step 3: Your Money—Understand Your Financial Situation
Knowing the ins and outs of your student loans and repayment options isn’t enough to make an effective student loan plan. You also need to understand your financial situation. Things like how much cash flow you have, how much of an emergency fund you have (if you have one at all), what debt you have besides student loans, and other considerations are all important factors in determining your repayment strategy.
Step 4: Decision Time—Choose Your Repayment Strategy
At this point, you will have full knowledge of your student loans, repayment options, and your financial situation. In this step, you combine all this information and choose the best repayment strategy for you.
Step 5: A Brighter Tomorrow—Optimize Your Money
Having a repayment strategy is great, but don’t stop there. Your situation today doesn’t have to be your situation tomorrow. I’ll share strategies and hacks that will allow you to continually improve your situation and put yourself in a better financial spot.
In addition to these five steps to a successful student loan plan, we’ll dive into a few specific areas that student loans tend to impact.
Bonus Section: Your Student Loans and Your Life
Mental health and relationships are two areas where student loans can have a big impact. Additionally, student loans pose a problem for people who go to school for a career and then realize it’s not the right fit for them. We will talk about all of these things in this section.
Whether you’ve spent no time looking into your student loans or have spent some time getting familiar with them, going through this five-step process will provide you the knowledge necessary to gain control of your situation and give you confidence to know that you are moving in the right direction.
Step 1:
The Starting Point—Know Your Loans
When I think back to when I took out my college loans, I don’t remember much. My parents filed my FAFSA for me. They chose the loans they thought I should take out. I was grateful I didn’t have to deal with it and went along with whatever they proposed.
I mean, the decision was made that I was going to college, right? I couldn’t control how much or how little my parents contributed toward my college education. I didn’t set tuition at the college of my choice. I never considered switching schools based on how much tuition was or what financial aid package I would receive. I chose the “best” college I got into, the one that “felt right” after the campus visit. The cost of college, and how much debt I would leave with, was an afterthought.
My parents may have explained the difference between subsidized and unsubsidized federal loans, but I never cared enough to truly understand. And even if I did understand the details at the time, I certainly didn’t retain this information. I didn’t keep a running tally of my loans. I didn’t review them regularly or see the impact of interest while I was in deferment.
While you may have been more hands-on with your student loans, I would bet a majority of borrowers relied on their parents or another authority figure to take care of their loan applications and decisions. It’s very common for graduates to not know what types of loans they have or how much they owe.
The reality is that when high school seniors are picking a college, they are making an emotional—not financial—decision.
Once a college is chosen, students typically do not switch for financial reasons. If their financial aid package, including loans, can cover the cost, students tend not to think about the impact loans will have when they graduate. Many have likely thought at one time or another, “Everyone takes out loans, so I should too.” Debt quickly becomes an afterthought.
It’s also not uncommon for those who have been out of school for a while, even years, to be a bit clueless about their student loan debt. They may have put it in forbearance or fallen behind on their loans and gone into default.
Understanding your loans is the first step to having control over your loans and your financial life.
The type of student loan(s) you have matters. It impacts:
•Repayment options, including eligibility for income-driven repayment plans
•Opportunities for loan forgiveness
•How interest is treated when loans are in deferment or forbearance
First, we’ll create a snapshot of your loans by finding all your loan information and putting it in a spreadsheet. This spreadsheet will be an important reference for the rest of the book.
Your Student Loan Snapshot
Creating your student loan plan starts with knowing what student loans you have. Thankfully, gathering this information is relatively straightforward if you know where to look.
One last word of advice before you do this: brace yourself
If you haven’t gone through this exercise before, what you see may not be pretty. Your debt may be tens of thousands of dollars higher than expected. This initial step could very well be the most difficult—but necessary—step in gaining control of your loans.
If you are shocked at the number you see after you total up your debt, take some deep breaths. You are going to get through this. It may not be easy, but ignorance is not bliss. Knowing your situation and taking action is key.
For federal student loans, go to the National Student Loan Data System website at https://www.nslds.ed.gov/nslds. You will need to create a Federal Student Aid identification number (FSA ID) if you don’t already have one.4
Once you are logged in, you can see your loans. Clicking on each loan will give you additional information, including the loan servicer, the interest rate, and the history of your loan, including when it went into repayment.
You may also have private loans. If you are unsure which bank or banks serviced your loans, you will want to find out. The best way to do this is to pull your free credit report at AnnualCreditReport.com. Your credit reports will include all your student loans, regardless of whether they are private, federal, or state. Once you identify the lender, get access to their online portal to see detailed information