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KEEPING LOAN DEBT DOWN

For many students, student loans are their first experience with borrowing money and understanding important financial concepts such as interest rates, repayment schedules and grace periods. If you must borrow student loans it's important that you have a good spending plan in place so that you can borrow as little as necessary. In addition, keeping careful track using a loan portfolio will help you stay organized and will help you once you enter repayment.

Tips for responsible borrowing

Below are some basic principles of responsible borrowing to set you on the right path:

  • Borrow only what you need
    • Loans should be a backup plan, so don't accept offered loans unless you have an established spending plan and need them
    • You can always borrower a lesser amount than what is offered, and make adjustments later if needed
    • Each year that you borrow loans, do a loan repayment estimator to see how much your monthly repayment would be so you can fully understand the impact of what you are borrowing now
  • Borrow the better loan first and go federal
    • Federal student loans have low, fixed interest rates and various repayment options
    • Need-based loans such as the subsidized Stafford loan and Perkins loan typically have lower interest rates or other perks such as interest subsidies and forgiveness options
  • If you must borrower more than federal loans, do your research
    • Private loans can have variable interest rates that may be great now, but increase steadily in later years (beware the bait and switch)
    • If you must borrower a private loan, do a thorough search and get the lowest interest rate and best grace period and repayment schedule
  • Reduce the amount you borrow by aiming to graduate within 4 years if pursuing a bachelor's degree

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Loan Portfolios

Knowing who you owe is important in setting up a successful repayment strategy. Start a document or database that contains basic information for each loan that you borrow to stay organized. This document should contain information such as:

  • Lender name
  • Loan Servicer name
  • Contact information
  • Amount borrowed
  • Interest rate (is it fixed or variable)
  • Grace period (if applicable, how long does it last)
  • Repayment period

Refer to this document to keep a log of notes in case you ever ask for a forbearance or deferment and track down who you speak with.

Tracking Federal Aid

The National Student Loan Database (NSLDS) is the U.S. Department of Education's central database of student aid. By visiting www.nslds.ed.gov and logging in with your FAFSA PIN, you can access information about your federal loans (Stafford, Parent PLUS, Grad PLUS), consolidated loans, Pell grant, and TEACH grant.

Some of the information NSLDS will archive includes:

  • Loan amounts
  • Name of loan holder and contact information
  • Loan guarantor
  • School associated with each loan
  • Payment periods for loans
  • Pell grant award amounts
  • Pell grant eligiblity used