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  • Archive for May, 2013

    WISER’s Commencement Speech: Real Finances in the Real World

    Wednesday, May 22nd, 2013

    It’s graduation season and soon it will be time for many new graduates to start paying back student loans. Loan repayment can be a stressful part of post-graduation life, but there are ways to make repayment easier and quicker. Here are some tips to help gain control over student loan repayment plans. (And If you are not a recent graduate, share this important information with your children, grandchildren, or friends.)

    Make informed decisions

    If you are still in the process of applying to schools and are worried about student loans, the Consumer Financial Protection Bureau (CFPB), a government-run consumer watch-dog group, has a great new Paying for College web application that will help you assess the financial costs of different educational options available to you. You can use this web application to find out about different types of educational financing options, as well as use the cost comparison tool to analyze the financial consequences of different schools side-by-side.

    Be in the know

    Once you take out loans to finance your education, it is important to understand those loans and your repayment responsibilities. Make sure that you know the amounts of the different loans you have, the interest rates on those loans, and who your loan servicer is.

    A loan servicer is a company that handles the billing and other services related to your loan. It is important to know who is in charge of your loans so that if you have questions or run into any problems you know exactly who to call. If you have a federal loan, click  here to access the U.S. Department of Education’s website for information on your loan servicer. If you took out a private loan, call the company that issued your loan to find out who your loan servicer is.

    Next, find out exactly how many loans you have, what you owe on each one, and what the interest rate is on each one. Often, students take out multiple loans with differing interest rates. You want to know the breakdown of exactly how much you owe and how much interest is accruing every day.

    Create an online account

    To help you keep track of your loan information, create an online account with your loan servicer. Creating an online account allows you to clearly see what outstanding loans you have, what their interest rates are, how much interest you have accrued on each loan, and how much your payments are and when they are due. An online account will also provide you with contact information for your loan servicer. You can use your online account to set up automatic payments and also to go in and make additional payments whenever you have some extra cash. Setting up automatic payments is crucial. If you forget to make a payment, you will accrue late payment charges. Setting up automatic payments insures your payments are made on time.

    Pay down your interest

    This is important advice for anyone in the loan process, whether still taking out loans or already paying them back. Even if you are still in school, you can make payments to your loans. Set a reminder every week to pay off the interest that has accrued on your loans. This will keep down the amount you owe once you graduate. If you have already graduated, work towards paying off the loan with the highest interest rate first. This loan will likely cost you the most over time, so the sooner you pay it off, the less you will have to pay overall. Remember, every payment you make usually goes to paying off the interest you have accrued first and then goes to paying down your loan’s principle balance.

    If anything happens, get in touch with your loan servicer

    If you have a problem making your payments or miss a payment by accident, contact your loan servicer immediately in order to prevent late penalty charges and to work out a repayment option that works for you.

    Pay down your loans faster

    Try to put any extra money you can towards paying down your loans faster. The quicker you pay them off, the less money you will pay overall. Try putting any work bonuses you receive towards your loans. Another trick it so take your tax return and put the refund you receive exclusively towards your student loans.

    Graduating with debt is not easy, but with tips like these you can reduce the overall cost and the amount of time it takes you to become debt free.

    And remember parents (and grandparents), don’t dip into your retirement savings to help pay for your kid’s loans. As a parent or grandparent, you may feel compelled to help your kids pay off their loans. But remember, they have a lifetime ahead to work, save, plan and re-pay. You do not have that same kind of time to re-build your nest egg. Instead, help them learn how to manage their loans and make smart financial decisions.


    About Us

    WISER is a nonprofit organization that works to help women, educators and policymakers understand the important issues surrounding women's retirement income. WISER creates a variety of consumer publications including fact sheets, booklets and a quarterly newsletter that explain in easy-to-understand language the complex issues surrounding Social Security, divorce, pay equity, pensions, savings and investments, banking, home-ownership, long-term care and disability insurance.

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