| Student loan paperwork a potential
nightmare |
|
|
|
Federal Perkins loans for low-income students are
issued directly by your school, which may have its own set of rules.
Such loans, however, already offer a low 5-percent fixed rate, so
it may not make sense to include the Perkins if you choose to consolidate
your loans. Another reason to keep these loans separate is that
only the unconsolidated portion of your Perkins loan is eligible
for loan
forgiveness should you enter a field, such as teaching or law
enforcement, that helps repay your student debt.
"That's why it's dangerous to consolidate the
Perkins loans, because you give up the forgiveness provision,"
says Kalman Chany, founder and president of New York-based Campus
Consultants and co-author of "Paying for College Without Going
Broke."
"If you intend to work in any of the fields of
employment that offer loan forgiveness, don't include your Perkins
loan in a consolidation."
The federal loan programs also allow eligible borrowers
to defer payments for up to three years due to economic hardship
or an inability to find full-time employment. You may be able to
defer, as well, if you return to school at least half time or participate
in an approved graduate fellowship or rehabilitation training for
the disabled.
Take note, however, that while the government pays
your interest on subsidized Stafford loans during deferment, interest
on unsubsidized Stafford loans will continue to accrue. If you apply
for deferment on a consolidation loan, you will retain interest
relief for any portion of your loan originally derived from a subsidized
Stafford loan and pay interest on the unsubsidized portion.
If you don't meet deferment eligibility, you may still
request forbearance from your lender, in which you postpone principal
payments on your loan, but interest continues to accrue. These reduce
your monthly payments and are generally granted in 12-month increments.
Incentive rewards
When you resume full payments again, it's important to get your
monthly checks in on time. Not only will it improve your credit
history, but some programs offer incentive rewards for on-time repayment.
After 33 months of on-time payments, for example, Nellie Mae and
Sallie Mae offer 3.3 percent cash back on the original principal
amount, which borrowers can take either as a credit to their account
or a check.
Managing student debt is an unenviable task, to say
the least. The fastest way to get your loans behind you is to stay
organized, explore your options and exercise good financial discipline.
Hey, you'll need those skills to succeed anyway.
"Student loans are a good way to learn about
managing your finances over the long-term" says Shireman.
Next up: Consider
consolidating your student loans before July 1.
|
