Debt Management

Remember, student loans are a significant financial commitment. Every dollar borrowed, plus interest, must be repaid. Accepting your entire financial aid package without careful consideration can lead to overwhelming debt.

To avoid this:

• Budget Carefully: Calculate your expected expenses and only borrow what you truly need.
• Track Your Borrowing: Keep a record of all loans and their terms.
• Estimate Repayments: Use online tools like the FinAid Loan Calculator or Federal Student Aid's Loan Simulator to project monthly payments.

Defaulting on your student loan means failing to meet the terms of your promissory note. This typically occurs after 270 days of missed payments. Consequences of default include:

• Immediate payment: The entire loan balance, plus interest, becomes due immediately.
• Loan transfer: Your loan may be assigned to a guaranty agency.
• Additional costs: You may owe collection fees and attorney's fees.
• Damaged credit: Default will be reported to credit bureaus, affecting your credit score for at least seven years.
• Wage garnishment: Your wages can be withheld to repay the loan.
• Tax refund offset: Your state and federal tax refunds can be applied to the loan.
• Legal action: The lender can take legal action against you.
• School reporting: Default may be reported to your school.
• Loss of federal aid: You may become ineligible for future federal student aid.

You can avoid default by

• making timely payments.
• responding to lender/servicer communications.
• reporting changes promptly (name, address, phone, enrollment).
• exploring deferment, forbearance, or repayment options.
• contacting your lender if you anticipate payment difficulties.

Effective money management starts with a plan. Budgeting is the key to controlling your expenses. To create a budget, you'll need to understand your income and expenses.

1. Calculate Your Income

Determine your total income for the semester or academic year. This includes:

• Earnings from employment (including spouse, if you are married)
• Financial aid
• Scholarships
• Grants
• Support from family or friends
• Savings or checking account balances
• Benefits (e.g. Social Security benefits)
• Other sources of income

2. Identify Your Expenses

List all your expenses. Break them down into:

• Fixed expenses: Costs that stay the same (e.g. tuition, rent)
• Variable expenses: Costs that change (e.g. food, transportation) 

Common expenses include:

• Tuition and fees
• Housing
• Food
• Books and supplies
• Transportation
• Personal expenses
• Insurance 
• Clothing

3. Create Your Budget

Subtract your total expenses from your total income. If your income exceeds your expenses, you're saving money! Consider increasing savings or exploring additional spending areas. If your expenses exceed your income, you need to adjust your spending or find additional income sources. 

By consolidating your student loan debt into one loan, you may avoid having to make multiple monthly payments to various lenders.

You may consolidate the following undergraduate and graduate loans:

• Federal Perkins Loan
• Federal Unsubsidized and Subsidized Stafford Loans
• Federal Direct Loans
• Health Professions Loans and/or Federal Nursing Student Loans

A consolidation loan may

• extend repayment for up to 30 years.
• lower your monthly payments.
• have higher interest costs using a weighted average of your loans.
• not qualify for certain deferments.
• not include private loans and other consumer debts.

Loan counseling is a federal requirement for students who borrow Federal Direct Loans. As a first-time borrower, you are required to complete an Entrance Counseling session prior to receiving the first disbursement of your loan proceeds.

Exit Counseling is required when you graduate or if you drop below half-time status. Students are obligated to repay the loan even if they

• do not complete their degree program.
• cannot find employment after graduation.
• are not satisfied with their education and other services.

Maintaining a strong credit score is essential for financial well-being. By making thoughtful spending choices, sticking to a budget, and using cash whenever possible, you can avoid debt and build a positive credit history.

Remember, your credit score can significantly impact your ability to purchase a home, car, or secure loans. A poor credit history can lead to higher interest rates or even loan denial.

To protect your financial future, monitor your credit regularly. You can obtain free credit reports from the following bureaus:

• Equifax
• Experian
• TransUnion

Credit cards can offer convenience and build credit, but they can also lead to debt if not managed responsibly. Credit card companies often target students with enticing offers, making it easy to overspend. Before applying, carefully consider whether a credit card is right for you.

Should You Get a Credit Card?

Ask yourself:

• Do I really need a credit card?
• Can I afford to pay the balance in full each month?

If you decide to apply, compare cards to find one with:

• Low interest rates (APR)
• No or low annual fees
• A grace period
• Rewards that align with your spending habits

Advantages and Disadvantages

Credit cards offer benefits like:

• Emergency funds
• Building credit history
• Convenience
• Potential rewards

However, they also come with risks:

• Overspending
• Late charges
• High-interest debt
• Damage to credit score

Tips for Responsible Credit Card Use

• Pay your balance in full and on time each month.
  • Try not to carry balances forward, as some cards charge 20% or more in interest (interest is usually called "finance charges" on your statement).
• Avoid cash advances due to high fees and interest.
  • Interest begins accruing as soon as you take the money out, not after the next statement closing.
• Be aware of annual fees.
  • Many times you are charged $50 or more just to have the card. 
• Review introductory offers carefully. 
  • A low rate may expire in six months and then increase dramatically after the "introductory offer."
• Monitor your spending closely.
  • If you are not able to afford the purchase now, chances are you won't be able to afford it in in a month when the credit card bill comes in.
  • Use the credit card for emergencies only.
• Read your statements carefully and call the company right away if you have questions.
• Consider using a card with purchase protection or extended warranties.

Dealing with Credit Card Debt

If you find yourself struggling with credit card debt consider:

• Cutting expenses
• Negotiating a repayment plan with your creditor
• Seeking credit counseling

There are two options available if you need to postpone making payments on your student loans.

Deferment

The type of deferment for which you may be eligible depends on the type of loan and the date on which you received your first loan.

Loans may be deferred if you are

• undergoing cancer treatment.
• experiencing economic hardship.
• in a graduate fellowship program.
• enrolled in school at least half-time.
• performing qualifying military service.
• a post-active duty service member.
• a Parent PLUS borrower with a student enrolled in school.
• enrolled in a rehabilitation training program.
• unemployed.

Forbearance

Forbearance temporarily pauses or reduces your student loan payments. However, it typically doesn't help you make progress toward loan forgiveness and can lead to interest accruing, increasing your overall loan balance.

Income-driven repayment might be a better option. It bases your monthly payments on your income, making them more manageable. You could also qualify for loan forgiveness after making consistent payments for a specific period.

Income-driven repayment is granted at the discretion of your lender or servicer. You must apply for a forbearance, and you are responsible for the interest that accrues during the forbearance period regardless of your loan type.

Common situations for which a discretionary forbearance may be granted include:

• Financial difficulties
• Medical expenses
• Change in employment
• Other reasons acceptable to your loan servicer

Depending on your situation, there are other types of mandatory forbearance that are available. If you meet the eligibility requirements for a mandatory forbearance, your loan servicer is required to grant the forbearance. Some of these situations include but are not limited to:

• Medical or dental internship/residency
• Department of Defense Loan Repayment Program
• Americorps
• National Guard duty
• Teacher Loan Forgiveness

For more information on options to postpone payments, visit studentaid.gov. 

Maintaining accurate financial aid records is essential. Be sure to keep copies of:

• Financial aid award letters
• Loan documents
• Correspondence with financial aid offices

Managing your money as a student can be challenging. To help you make the most of your funds, consider these cost-saving strategies:

Housing and Meals

• Compare costs of housing that may be less money per month and include utilities.
• Consider a roommate, if you are single
• Consider living with your parents, if single
• Cook at home rather than eat out
• Take your lunch
• Clip coupons
• Don't go food shopping when you are hungry

Books and Supplies

• Buy used books
• Borrow books from students who had the class (if edition is the same)

Transportation

• Take public transportation, if you can
• Ride with a friend or a classmate and share the cost
• Buy a used car, not a new car

Personal Expenses

• Buy what you need and avoid impulse buying
• Compare costs, such as insurance and childcare
• Try to buy items without using your credit card - use cash
• Find inexpensive ways of entertainment - rent videos with friends or family
• Take your own snacks to the movies
• Shop in a second-hand store or buy sale items
• Use prepaid phone cards for long distance calls
• Borrow only what you need. Remember you have to pay loans back.
• Put your financial aid funds in the bank and let them gain some interest.

By implementing these cost-cutting strategies, you can significantly reduce your expenses. While it's essential to borrow only what you need to cover your educational costs, remember that careful budgeting can help you minimize your reliance on loans.