Student Loan Payoff
And Your Personal Finance Management Plan

Executing a student loan payoff plan will make the joy of college graduation and beginning a new career far more enjoyable. Getting out of college with thousands of dollars of student loan debt isn’t something you'll want to worry about going forward—you should come up with a reasonable plan to pay off your student loan debt.

When you are just wrapping up your education and don't have the income to cover all your living expenses and payoff your student loans too, things can start to get very challenging and financially stressful. You don’t want to be in this place.

The last thing you want to do is allow your student loan debt to damage you credit rating. You need to understand your options so you can pay back student loans in a timely fashion and keep your credit history from being harmed.

Many college graduates, especially in today’s economy, find it difficult to pay back student loans immediately for the reasons just stated. You may be considering defaulting on your student loan—this is a bad idea for a number of reasons.

Three Reasons Not to Default on a Student Loan

• It will harm your credit rating and significantly restrict your chances of getting any type of loan in the future.
• Student loan debt cannot be forgiven, even by declaring bankruptcy.
• Employers today often do a credit check prior to hiring. A bad credit rating could end up costing you a job offer.

If you don't want these things to happen in your life you'll need to come up with some viable, reasonable, and doable student loan payoff ideas. Don't default on your student loan debt—find a way to arrange for repayment of this debt.

Student Loan Payoff Options

There are usually a number of options available for relieving your student loan debt. First, get familiar with what type of student loan you have, what type of payback options are available, and what terms are stated in you documents you signed to get the original loan. Doing all this in a timely fashion after graduation will help you develop a personal financial plan that keeps your credit score intact, rids you of any thoughts about defaulting, and starts the loan repayment.

Depending on your specific loan agreement you will likely find you a grace period of 6 to 9 months after you graduate or finish your education before you’ll need to begin making student loan payments. Some loans will require you to begin making interest payments immediately, but other loans will allow you to pay interest over the term of the loan.

You should also consider asking your lender about an interest rate or even a principle reduction of your student loan. It is not too likely that you'll get the gift of a principle reduction but there is a fair chance of negotiating an interest rate reduction and this could reduce your payments significantly. If you are in severe financial difficulties and make this known to your lender they will be more likely to grant some relief since doing so may be a good option for them too. They want to make sure you can make payments on your student loan and that you don’t get forced into a student loan default. Whatever you do, don't give up. Keep trying to find a student loan pay off solution that works for you.

If you have been unfortunate and suffered the effects of a severe automobile accident, or are disabled, or you are in the military, you may qualify to have your student loan canceled. Certainly if you are in any of these positions you should look into this option and see if you have a chance of qualifying. It is far better to have your student loan debt canceled than to just stop paying it.

Here is another possible solution. If you are facing tough times and having difficulty paying, but you previously paid your monthly installments on-time and in good faith, you may qualify for a postponement in payments, or a deferment. Another option is forbearance, where a lender may allow you to reduce your payments for a period of time until you get yourself on a better and stronger financial standing. Any postponement or deferment will need to be discussed one on one with your lender.

If You Default on a Student Loan

Bad things can happen very quickly if you do decide to not pay your student loan. It is possible that your lender demand you to repay the full amount of the loan immediately. Or, they may turn your student loan over to a collection agency. You also could incur late fees or other charges and will very likely do damage to your credit rating.

If you have already defaulted on your student loan payment—don't give up. You may be able to arrange to begin a new repayment schedule and restore your credit. Contact your lender and come up with a plan that is agreeable to both parties. You should try to get the lender to waive any incurred fees or late charges and to restore your credit rating.

Typically, once you have caught up on your amortization schedule and consistently made payments over some predetermined time period your loan will be considered rehabilitated. When this point is reached you should make sure your lender no longer considers your loan to be in a default status and ask them to remove that mark from your credit report.

Make Your Student Loan Payoff Happen

Making a student loan payoff plan part your overall personal finance management plan will help you begin to establish a positive, stress-free post graduation life style.