Graduate Loan Repayment Default Avoidance

Default Avoidance

It is very easy for student-borrowers to over extend themselves and experience difficulties managing repayment obligations. There are, however, many resources and tools that can help you make sensible borrowing decisions or overcome problems you may be experiencing. Here's some advice:

Before You Borrow:

1. Make sure you really need the loan you are considering. Could you meet the expenses by working extra hours or from another source?
2. Think about the "big picture" effects of your borrowing. How much will you have to borrow in order to graduate (your school's financial aid or admissions office should help with averages)? Calculate the monthly payment for these loans.
3. Consider how much do you intend to earn once you enter the work force? Your student loan payments should be less than 15% of your salary. Be Realistic!
4. Stay on top of your expenses! Know where you spend your money and be on the lookout for ways to save.
   • Try public transportation rather than owning a car
   • Share a room with roommates instead of living alone
   • Eat at home rather than eating out
   • Use e-mail to cut down on long distance phone calls

Managing Existing Obligations:

1. If you're having trouble meeting your student loan payments, contact your loan servicer. You may qualify for a deferment, forbearance, or repayment alternative that is more affordable.
2. Consolidation can help by extending your loan's repayment term beyond the standard ten years. While this will increase the total interest charges, the monthly payments will become more manageable.
3. Watch your expenses! Just as you need to be cautious when you're in school, you need to be aware of your expenses after you leave school.
4. Limit credit card usage to absolute necessities. Remember you'll pay more for every charged item because of the credit card's finance charges.
5. If you must have credit cards, shop around for low interest rates or call existing credit card providers and ask them for a lower rate.

Default Avoidance information from DOE