By John Daskauskas
Special to GUIDON
If you are like any typical recent college graduate, you are already trying to get ahead and make your way into the employment world.
Before all students walk away from their college campuses, they generally put all their college loans on either a deferment or forbearance (e.g. you don’t pay now, but you will have to pay later).
There is nothing wrong with doing these things to your college loans as you seek your next job. It is important to understand fully how these options will affect your financial health.
Student loan deferment and forbearance is a double-edged sword; you will be provided some leeway to push your original loan payments down the road but this deferment or forbearance will cause the interest on your loans to accrue.
If you don’t pay this interest during these postponements, it will be added to your overall balance and then you will be paying interest on your interest once payments begin.
If you are struggling to repay your loans due to circumstances that may continue for an extended period, a better option may be to consider changing to an Income Based Repayment Plan (IBR).
Income based repayment plans base your monthly payments on your income and family size, and in some cases your payment could be as low as $0 per month.
They can also provide loan forgiveness if your loan is not repaid after 20 or 25 years.
You will need to contact your loan servicer immediately if you are having trouble making your student loan payments. You may not be eligible for a payment that low, but paying anything regularly is better than postponing repayment.
Currently there are four Income Based Repayment (IBR) Plans available for your US Department of Education Federal Student Loans:
— Revised Pay As You Earn Repayment Pan (REPAYE Plan)
— Pay As You Earn Repayment Plan (PAYE Plan)
— Income-Based Repayment Plan (IBR Plan)
— Income-Contingent Repayment Plan (ICR Plan)
Almost all US Dept. of Education Federal Student Loans will fall under one of these IBR Plans but you will have to verify that by going to the Federal Student Aid website (https://studentaid.ed.gov/sa/) to see which loans are accepted to which IBR Plan and would be most cost-effective for you.
Private student loans and institutional student loans are not eligible for any IBR Plans. You will have to make separate arrangements to pay off those types of loans.
Not sure how many loans you have or who is servicing them? Your student loans may or may not all be with the same servicer, and it’s important to find out which companies are servicing your loans.
Go to the National Student Loan Data System (NSLDS): US Dept. of Education Loans at
https://nslds.ed.gov/nslds/nslds_SA/ or locate your Private Loans at www.annualcreditreport.com.
For more information, please contact the Fort Leonard Wood Army Community Service Financial Readiness Office at 573.596.2078.
(Editor’s note: John Daskauskas is a personal financial readiness specialist at the Fort Leonard Wood ACS Financial Readiness Office. Brandy Hudson and Tammy Fink from the FRO also contributed to this article.)