Many graduates are worried about how they will begin to pay the
thousands of dollars of student loans they accumulated during
college, but there are things students can do to reduce, or even
nullify, their debt.
If students wish to lessen the weight of their loans, numerous
student financial advisors recommend consolidating loans and
remaining in constant contact with lenders.
When students consolidate their loans, they reassign all their
debt, usually dispersed among numerous supporters, to only one
lender. If students consolidate at a time when interest rates have
decreased, they will save money.
On July 1, federal student loan rates are expected to fall to
lowest rate in the 38-year history of the student loan program
““ from 4.06 to 3.42 percent ““ according to the United
States Department of Education.
If students choose to consolidate their loans, they can take
advantage of this historically low interest rate.
“Most students graduating probably do not have
consolidated loans,” said Joshua Kedzierski, a student loan
representative for internationalstudentloan.com and
financialadvisor.com.
There is a minimum dollar amount required for consolidation,
which varies from lender to lender.
Students may also decide to take refuge in their loan grace
periods, which begins when the student is no longer enrolled as at
least a part-time student.
Jay Jirakumtacha, a graduating psychology student with more than
$10,000 in loan debt, said he is worried about how he is going to
pay off his loans.
He said he is optimistic that the grace period will afford him
time to find a job before interest starts growing on his current
loans.
Most students at UCLA have either Stafford or Perkins loans, and
often, a combination of both. The grace periods for these loans
types are six months and nine months, respectively.
For other loans, such as regents or primary care loans, the
grace periods differ, but can be identified in the terms and
conditions of the loan promissory note.
Interest does accrue during a loan’s grace period, but
students are only responsible for paying that interest if it is
applied to an unsubsidized loan. For Perkins and subsidized
Stafford loans, the federal government picks up the interest
bill.
Once students begin to pay back their loans, they may wish to
use a graduated loan payment plan, because the fees start out
relatively small, and get bigger over time.
Ray Parris, UCLA student loan services supervisor, said students
will benefit if they pay off their student loan debt before
addressing other debt, such as credit card debt.
“Student loans are better to pay off because you
don’t reaccrue it,” he said.
Parris added that if graduates are considering graduate school
for the purpose of postponing loan payments, it is better for them
to pay off their loans.
“There is no way to indefinitely postpone units,” he
said.
For students who are not continuing in part-time education, loan
counselors advise they starting thinking about how to pay their
loan bills now.
“The biggest problem students have after school is
avoiding payments,” Kedzierski said.
Following their grace period, if students fail to make a payment
for nine months, they will go into default.
When a student loan goes into default, the entire unpaid amount
of the loan is immediately due, and a collection agency may require
the loan recipient’s employer to withhold part of, or all of,
his or her paycheck to reimburse the unpaid loan.
“Once you go into default, your credit is going to be
pretty bad for the next seven years,” Kedzierski.
According to UCLA Students Loans Services and Collections, UCLA
has one of the lowest default rates in the nation ““ less than
two percent.
If students are worried about going into default, it is
important they know their options.
Students who return to school or are unable to obtain employment
may be able to defer their loan payments or qualify for
forbearance, both of which would give students more time to repay
loans.
Because of all the ins and outs of the loan business, Parris
advises students to speak with a student loans counselor to better
understand how to consolidate or make payments on their loans.