Be Real about Student Loans: 5 Tips Every New Graduate Needs
By Amelia Josephson, Office of Financial Empowerment at the NYC Department of Consumer and Worker Protection
Across the country, college seniors are finishing their exams, ironing their graduation robes (or not — no judgment), and preparing for life after school. Roughly two-thirds will graduate with student loan debt. The average loan balance? Close to $30,000. If you’re part of the fortunate third and will be graduating without debt, congratulations! If not, here are some tips that can ease your transition into loan repayment.
1. Know what you owe
It can be tempting to avoid logging into the National Student Loan Data System and pulling up your federal loans or requesting your free credit report to check on your private student loans. But avoiding this loan information won’t make the debt go away. Student loan exit counseling, which is mandatory for all federal student loan borrowers who are leaving college, is a good start. Even better? Getting comfortable accessing this information yourself so you can check on your loan balances regularly as you pay down your debt.
Another reason to know what you owe is that when you check on your loan balances you’ll find out who your loan servicer is. The loan servicer is your point of contact for any repayment questions or issues you might have, and who you will pay every month. Wondering why your last payment isn’t showing up on your records? Call your servicer. Want to make sure any student loan-related mail will reach you at a new address? Call your servicer. You get the idea.
2. Know when you have to start paying your loans
Another reason not to procrastinate on knowing what you owe is that the clock is ticking. All federal student loans and many private student loans have a grace period of six months after you leave school. That grace period is designed to let you settle into life after college. Maybe you’re starting a new job, moving to a new city, or just enjoying the fact that you no longer have to worry about school.
Regardless of what this transition period holds for you, it won’t last forever. Find out when your first payment is due and make a plan to pay on time. Even better, set up automatic payments so you don’t have to spend mental energy on meeting your payment deadlines. If you can afford to start making payments before the grace period ends, do so. For all loans except subsidized federal student loans, interest is racking up during the grace period. The sooner you start making payments, the less interest you’ll pay.
Some loan forgiveness programs are time-sensitive, too, which is another reason to get on top of your student loans soon after you graduate. Here in New York State, for example, we have a student loan assistance program called Get on Your Feet. If you qualify for the program, the State of New York will pick up the tab for your first 24 income-based loan payments.
3. Know your options
The student loan repayment system isn’t exactly simple. Sure, there’s the standard 10-year repayment plan, and if you can afford your monthly payments under that plan then more power to you. You’ll pay less interest over time and be debt-free in a mere decade…
But the standard repayment plan isn’t the only option. If your monthly payments under that plan are higher than you can afford, you can work with your loan servicer to enroll in one of a handful of income-driven repayment plans that set your monthly payment at an amount based on your discretionary income.
If you’re working for the government or a non-profit and want to take advantage of Public Service Loan Forgiveness, which wipes your debt after 120 qualifying payments, you’ll have to enroll in an income-driven repayment plan (and jump through other hoops described here) to be eligible for forgiveness. The sooner you enroll, the sooner you start the clock on those 120 payments.
If you think the standard repayment plan might not be right for you, it’s a good idea to enroll in a different repayment plan during your grace period. That way, when your first payment is due, it will match the repayment plan you’ve chosen. If you wait until the first payment is due and find out it’s higher than you can afford, you’ll have to scramble to enroll in another plan.
4. Know how to get help
If just reading the first three tips on this list has you feeling overwhelmed, don’t panic. Our fourth tip is to know how to get help. Here in New York City, the Department of Consumer and Worker Protection (DCWP) offers free, confidential, one-on-one financial counseling at the NYC Financial Empowerment Centers, which are run in partnership with community-based organizations. The Centers’ trained financial counselors can help you understand your repayment options, avoid loan default, and more. DCWP is also hosting a series of Student Loan Clinics this spring where you can get one-on-one financial counseling specifically about your student loans. Event details are available at nyc.gov/studentloans.
How do I know so much about this service? I work at DCWP and I’m part of the team that is putting on these student loan debt clinics around the city. I feel privileged to work on this important issue that affects the financial health — and stress levels — of so many people. My friends call me a broken record, always pitching DCWP’s student debt counseling services to anyone who mentions their loans. Counseling isn’t the only resource my agency offers, either. If you’re not sure you need to speak to a financial counselor just yet, you can check out detailed student loan tips at nyc.gov/studentloans.
5. Know you’re not alone
The last tip on our list is really more of a reminder. If you have student loan debt, you’re not alone. In New York City, around 15 percent of adults have a student loan. That’s a million people. Across the country, there are roughly 44 million people with student loan debt. So whether you’re a prospective, current, or former student loan borrower, share your loan experience on social media using #TalkStudentLoans. Together, we can amplify the message that student loans are REAL debt so that every New Yorker knows their rights and responsibilities and national policymakers step up to help and protect borrowers.
As you celebrate your graduation and prepare for your next step, don’t forget to stay on top of your student loans. Yes, it’s harder and more complicated than it should be, but the consequences of falling behind on your student loan payments are serious. You survived those long lecture sessions, the 20-page term papers, the WTF (Where’s The Food) moments during late-night team projects, and the final finals! You can do this, and we’ll be coaching and cheering for you along the way.