During the course of your college career, an instructor might have reminded you that there are no silly questions. If something is unclear, it is always a good approach to raise your hand and ask for clarification.
Today’s student loan borrowers might want to take that advice to heart, because it’s easy to get confused about student loan debt. Here are five seemingly silly questions about student loans that aren’t so silly after all:
- Do I really have to repay my student loans?
- Who is my student loan servicer?
- How do I find my interest rates?
- If I can’t afford my student loan payments, can I lower them?
- Can I combine all my student loans?
Do I Really Have to Repay My Student Loans?
Yes. Borrowers agree to pay off their student loans when they sign to receive them.
Most current federal student loan borrowers have enjoyed the longest payment freeze on federal student loans in history. First mandated by the federal CARES Act in March 2020, the administrative forbearance is scheduled to end Jan. 31, 2022. Affected borrowers should be ready to resume student loan payments in February.
Loan forgiveness might be an option to full repayment. It pays to stay current with the U.S. Department of Education’s overhaul of the Public Service Loan Forgiveness Program, known as PSLF. Teachers, nurses, first responders, service members, those working in nonprofit hospitals, and other nonprofit and public service workers can potentially have their federal student loans forgiven.
Changes to PSLF, announced in October 2021, expand the previous limits with eligibility regarding type of loan, repayment options and past loan payment history. To explore whether you can take advantage of the program changes, visit StudentAid.gov.
When it comes to private student loans, every bank or other lender has its own policy regarding payments and how they will attempt to collect from you if payments are late or if you default.
Who Is My Student Loan Servicer?
Student loan servicers are the organizations that handle payment and administration of your federal student loans. Loan servicers sometimes change, occasionally more than once. It is likely that borrowers who take out a mix of federal and private student loans over the years will have multiple loan servicing organizations.
A great place for borrowers to find a loan’s servicer is the National Student Loan Data System. The centralized listing is a one-stop resource for the complete life cycle of federal loans and grants, from financial aid approval through disbursement, repayment, deferment, delinquency and closure.
For private student loans, start with your credit report, which tracks current and past credit obligations, including student loans. You should be able to find the name of your private lender or lenders there. Go to AnnualCreditReport.com to get a free report from the three main credit reporting agencies: Equifax, Experian and TransUnion.
How Do I Find My Interest Rates?
As with other loans like mortgage and auto financing, the interest you pay to a lender is the cost of borrowing money. Your student loan interest rate varies depending on the loan type, such as whether the loan was for undergraduate or graduate education.
The total interest you will end up paying includes other terms such as the date the funds were first disbursed to you and how long it takes you to pay off the loan. Once the interest rate of a loan has been established –
such as a federal student loan or a private loan with a fixed rate – it won’t change.
To find interest rates on federal student loans, visit NSLDS and follow the login instructions for the MyStudentData Download to access those details and more.
The interest rates for private student loans are set by the lender. To track down interest rates on those, contact each lender to find out the specifics of your loans. Private student loans offer fixed and variable interest rates, which you should monitor on your statements to maintain an accurate monthly budget.
If I Can’t Afford My Student Loan Payments, Can I Lower Them?
Managing student loan debt is all about affordability. Based on your current monthly income and expenses, you might find that continuing payments for federal student loans or resuming them after a period of deferment or forbearance is a challenge.
Be sure to explore your options to lower your monthly payments on qualifying federal student loans by switching to an income-driven repayment plan. It starts with filling out an application and recertifying your information to get a lower payment that you can better afford.
While the new monthly payments will be lower, interest will continue to accrue. If it takes you longer to pay off your student loans as a result, your total debt payoff will be higher.
There are no income hardship requirements, so most federal student loans can qualify for one of the types of income-driven repayment plans. Ineligible loans can become eligible if the borrower consolidates them under the federal direct loan consolidation program.
If you can’t afford your private student loan payments, talk to your lender. They typically don’t offer income-driven plans, but they might offer alternative repayment options on a case-by-case basis. Keep in mind that they have no obligation to do so, but they do want their money. Defaulting on your loans is the last thing anyone wants in this situation.
Can I Combine All My Student Loans?
One of the upsides to consolidating your student loans is enjoying the convenience of a single monthly payment. This makes payment easier to manage in the long term. Another advantage is you might be able to switch any variable-rate loans you have to a fixed interest rate, which makes budgeting simpler.
But be aware of the downsides.
For most borrowers, consolidation lengthens the repayment period. So your cost of borrowing will actually be higher since you will likely pay more interest over the long run. Any outstanding interest on the consolidated loans will be calculated with the original principal balance on your consolidation loan, called capitalization, which means that interest will accrue on a higher principal balance than if you had not consolidated.
Also, be sure to look into how consolidation might affect your eligibility for income-drive repayment plan forgiveness or the Public Service Loan Forgiveness program.
In all, getting a handle on these fundamental questions will set you up for success as you pay off your student debt. Each person’s financial situation is unique. To handle your specific challenges as you consider your budget and full financial picture, you may find an accredited national nonprofit organization that specializes in this area to be a useful resource.