Student loan is good but there are several mistakes that many students do at the time of repayment. If you have taken student loan then there are many thing you can stop doing so that you can easily repay your loan. Below we have written few points that you should take into consideration.

1. Ignoring your bills

The basic thing that you should not do is to never ignore bills from your student loan servicer. Whenever you find that you cannot make payments, you should immediately contact your lender. It will take to repay all your student loan and you should understand it.

Just remember that if you default on federal student loans, you may lose your tax refund and even face garnishment of wages. Moreover your credit score will also suffer. A federal student loan is deemed to be in default if payments are not made for at least 270 days (approximately 9 months).

• Making late payments

You should always remember not to make late payments. Your account will be deemed a delinquent on the day of your missed payment. The account maintains its criminal status until the last due sum has been charged or you have arranged for a deferment, forbearance or a separate repayment plan.

On failure of payment for more than ninety days, your credit service company will report the transaction to the 3 major credit bureaus and those are Equifax, Experian and TransUnion. The best thing you can do is by registering for autopay. Autopay will help you in paying the installments timely.

Furthermore there are some lenders that offer an interest rate discounts if you give them permission to deduct payments automatically from your bank account.

• Borrowing more money than you need

Whenever you need a student loan, you should only borrow the amount that you actually need. If you will take more money then you need to pay high interest rate for longer period of time. Always try to borrow as little as possible to try to make up the difference with grants, scholarships, and money from side jobs.

• Paying for student loan help

There are many organizations that charge fee for student loan. In actual you do not need to pay any fee for your student loan as you can get help directly with your loan by talking directly to your student loan servicer. Here we advise you to not pay for the service which you can get for free. Besides, the money’s supposed to be going to your loans.

• Not making extra payments

Whenever you have extra money at home or you become financially strong, you should add extra money into your student loan balance. As you may know that interest increase on a regular basis, so every penny helps. You should pay down your debt more easily and effectively by instructing your lender not to make additional payments to any potential payments and to make extra payments to the loan at the maximum interest rate.

• Spending Money on Wants, Not Needs

You should not spend student loan for other purposes such as buying TV or mobile phones etc. You should only use it to pay for your education so that there is no tension of a bad debt. You should always understand what your needs are what are you want. Just think of tuitions and not treats or it is your budget for books and not booze.

• Choosing the Wrong Repayment Plan

There are different repayment plans available and you should choose the one that suits your budget. Also, if you are going to choose a plan with lowest monthly payment then remember that it has the longest repayment term so it will directly increase the total interest you will pay. Just choose the right payment plan by thoroughly doing your analysis and go for the one that suits you best. For example, Income based or “Pay as you earn” plans look good as they give you 25 years of time frame for the repayment but ultimately cost you more overall as you have to pay high interest on it. In our view you should always choose the plan with 10 years plan if you can afford high installments so that you do not have to pay high interest at the end. 

In our view, you should always choose the monthly student loan payment with no more than 10% of your expected salary. Start by measuring your monthly loan payments (including interest) on the basis of a 10-year repayment schedule — which appears to be the typical choice.

Conclusion

For students their student loan is the first huge sum of money and they should know how to use it. Choosing the right repayment plan is also the big factor. Avoid these common money mistakes and try to repay the loan amount as soon as possible.