After college ends and your student loan repayments begin, you may feel unsure of yourself and doubtful of your ability to repay your loans. Mistakes you can learn from are bound to happen throughout your life, but it’s best to keep those mistakes out of your student loan debt, or you’ll end up having to pay more money than you need to. These are some of the most common federal student loan debt mistakes that recent graduates, parents, and even current students make. Knowing these common mistakes will prevent you from making easily avoidable errors with your loans.

AVOIDING YOUR LOAN PAYMENTS

It can be easy to avoid looking at your loan payments or “forget” about them, but doing so could cause your interest to rise or lead to late or defaulted payments. A defaulted loan payment never looks good—especially to anyone performing a credit check on you. As soon as you get a letter or e-mail about your student loans from your lender, it’s time to act. Log into your FSA account for federal loans, and look at how much you need to pay and when. Set reminders for yourself so that you don’t forget to make a payment.

If the payments seem too high for you to handle, you may need to try a different repayment program. Income-driven repayment plans give you time to adjust, especially if you’re unemployed.

NOT KNOWING WHAT TYPES OF LOANS YOU HAVE

Your response to the question “What type of loans do you have?” should never be “I don’t know.” The first thing you need to know is whether your loans are private or federal. For federal direct loans and Perkins loans, the government can provide help to the borrower. The government cannot touch private loans unless your state has laws in place for private loan companies.

There are pros and cons to each kind of loan, though typically having federal assistance is more beneficial than having to deal with a private lender. With federal loans, you’re less likely to be able to get a settlement agreement, but settling a private loan can lead to the private lender scamming you with the remaining payment if you’re not careful during the settlement process.

CHOOSING THE WRONG REPAYMENT PLAN

The federal government has several different kinds of repayment plans for you to choose from. Picking the wrong repayment plan can lead to severe budget issues or extreme interest buildup. Make sure to pick a repayment plan that allows you to make the most of your money without taking too much out of your bank account. It may be hard to find that Goldilocks spot for your monthly payments, but getting as close as possible to the perfect amount will save you from accruing interest.

It can be tempting to choose a payment plan that offers monthly payments far lower than your budget necessitates, but that payment plan likely won’t be as effective. Longer payment plans with smaller monthly payments could leave you with extra interest that you don’t want to deal with. If you can afford to pay for a shorter repayment plan, it will be worth it.

NEVER TELLING YOUR CHILDREN HOW THEIR LOANS WORK

Parents, talking to your future college student about student loans doesn’t need to feel like pulling teeth. Not all of the most common federal student loan debt mistakes are the student’s fault—some responsibility falls on your shoulders as a parent. Having the student loan conversation before or during college is essential for your student’s understanding and for keeping them coolheaded when they must handle their loans on their own. Try to simplify each loan concept, but don’t infantilize your child. Their high school or college should have plenty of resources to help with the process of learning about loans.

If you’re a college-aged or graduated young adult, it’s not too late to ask your parents about specific loan issues. Parents who have guided you through college have probably been looking at your loans regularly, and they’ll be useful resources if you’re struggling with loans.

PAYING THE MINIMUM

Some months, you may only be able to pay the minimum required payment for your loan repayment plan, and that’s okay. However, you should plan on paying a bit above the minimum repayment whenever you can afford to. Paying above the minimum will result in less interest and an accurate loan forgiveness schedule. If your loan payments are $0 for any reason, paying some amount of money is better than leaving the amount at $0. This is even more relevant for times when the federal government issues a mandatory student loan forbearance, such as during the current pandemic.

NOT CHANGING YOUR CONTACT INFO

Shortly before you graduate from college, your school will have you fill out a form for federal student loans that asks for your current address and your parents’ address. You’ll need to regularly update this online so that you letters and information can be sent to you through the mail. When you’re moving, it can be easy to forget about changing your address on your Federal Student Aid account. However, you’ll get a letter from the IRS at your new address confirming that you have reset your contact information.

NOT ASKING FOR HELP

Understanding student loans can be a difficult process, especially when you have to learn everything else about money as well. You should have plenty of resources to help you, whether you seek help through friends, family, or experts. Staying on top of your debt can also be hard, and you may need to ask relatives for assistance. See if you have family members who are willing to support your student loan payments.

Professional student loan relief companies such as Hope Credit specialize in assisting with lofty loan payments, and they can even help you refinance student debt. Refinancing your federal student loan debt places your loans under a new private lender who may have a lower interest rate. Even if you have defaulted on loan payments, Hope Credit can help you understand your options.

Hope Credit can provide you with student loan professionals who can get you through the fear and doubt.
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