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Student Loan Repayment Mistakes

| October 15, 2018

The amount of student loan debt outstanding increased substantially following the Great Recession. Student loan debt now represents over $1.5 trillion and continues to increase, partly because borrowers are not aware of their options or make common mistakes. Therefore, it is important to actively manage student loan debt in order to pay it off as efficiently as possible.

The first step is to know how much is owed to which lender. This may seem like common sense but recent surveys show that many college seniors do not know how much they owe or which government or private loan program they owe the money to. This can create a problem if the student moves and does not update their contact information with  their  lender as the  balances  will continue to grow due to interest and late payment penalties.

Those with student loans may also be able to take advantage of repayment programs that will reduce the cost of paying off their student loans. For example, students that secure steady employment may be able to refinance and consolidate their student loans at lower interest rates. In addition, some lenders offer reduced interest rates to borrowers that pay via automatic re-payment plans. 

Finally, many borrowers may fall for student loan repayment scams that offer get their student loans forgiven. These programs often charge upfront fees with no results and leave the borrower in a worse financial situation.