Student loans: The more you learn about them, the more questions that seem to crop up. What’s the best way to get out of student loan debt? Can I simplify my monthly payments? Whom do I talk to about all this?
It’s easier to surrender to binge-watching more of your current favorite show on Netflix than it is to deal with your loans, but the Department of Education knows you need to face them at some point — which is why you spent 20 to 30 minutes in student loan exit counseling after you left school. Unfortunately, it’s easy for even the most diligent borrower to miss a few important things along the way.
Here are five tips from exit counseling you probably don’t remember, but should:
1. Think of your student loan servicer as your new best friend
Your student loan servicer is the company that receives your payments, so it should be your first point of contact if you ever have trouble affording them or have questions about your loan. You should also contact your servicer if you:
- Graduate or leave school. Your servicer needs to be up to date on your progress. Keeping in touch will also help you learn about your grace period and repayment options.
- Change your name, address or phone number.
- Transfer schools.
- Are a reservist called to active duty with the U.S. armed forces for more than 30 days.
Find your servicer by visiting the National Student Loan Data System. You’ll need your Federal Student Aid ID to log in.
2. Take advantage of tax benefits
The next time you’re doing your taxes, remember to check if you qualify for tax breaks based on your loans or student status. There are two main types of tax “rewards” you may be able to take advantage of:
- Deductions: These reduce your taxable income and apply to educational expenses, as well as the interest you pay on student loans during a given year.
- Credits: These reduce the taxes you owe and apply to educational expenses while you’re in school.
In general, tax credits — which can result in a refund — are better than deductions. Whether you’re filing jointly with a spouse, on your own, or your parents claim you as a dependent, you’re likely eligible for some kind of benefit. The IRS has more details on tax benefits for education.
3. Keep an eye on your subsidized federal loans
If you take longer than your published program length to graduate, you might become responsible for the interest on your subsidized loans while you’re still in school. Why? Subsidized loans, which are usually interest-free while you’re in school, have a maximum eligibility period.
The limit applies to those who first took out federal loans on or after July 1, 2013. If, for example, you take more than six years to finish a four-year degree — or 150% of your published program length — you’ll lose your eligibility for direct subsidized loans. You can still take out the maximum amounts, including sums for both subsidized and unsubsidized loans — but you’d be responsible for paying the interest, so it’d be “subsidized” in name alone.
4. Consolidate your federal loans to keep track of payments
Consolidation — the process of combining your loans into a single, new loan — can simplify your payments, but it might cost you more in the long run. If you consolidate your federal loans, your interest rate will be the average of your current rates, rounded up to the nearest 1/8 of 1%. That’s not a huge difference, but it can add up, especially if your loan term is extended in the process. Keep in mind that you may end up paying more overall if your loan term is extended and including your Perkins loan means you’ll lose public service forgiveness benefits on that loan. Once applied, consolidation can’t be undone.
5. Contact the FSA ombudsman if you’re really in a bind
If you’ve tried working with your servicer but still have issues with your federal loans, it might be time to contact the Federal Student Aid Ombudsman Group. It’s an impartial outlet dedicated to helping you resolve federal student loan concerns — but it’s a last resort.