Student Debt Management

https://studentloans.gov/myDirectLoan/index.action

The first step in getting student aid is completing the Free Application for Federal Student Aid (FAFSA) at www.FAFSA.gov . You must do this every year.

Borrow Only What You Need

You must repay a federal student loan, even if you:

Control How Much You Borrow

Borrow as a last resort and only borrow what you need. You don’t have to borrow the maximum amount of federal student loans each year you can request a lower amount through your school’s financial aid office.

Loan Basics –Terms You Need to Know

Interest Accrual

  • Direct Loans are “simple daily interest” loans. This means that interest accrues daily.
  • The amount of interest that accrues per day is calculated by dividing the interest rate on your loan (as a decimal) by the number of days in a year, and then multiplying that by the outstanding principal balance.
  • For example, on a $ 10,000 Direct Unsubsidized Loan with a 6.8% interest rate, the amount of interest that accrues per day is $ 1.86: (0.068/365 X $10,000 = $1.86).

Capitalized Interest

  • If you are in a deferment or forbearance for 6 months, the loan will accrue interest totaling $340.
  • If you don’t pay the interest, it is capitalized (added to the outstanding principal balance). You will be charged interest on the increased outstanding principal balance of $10,340. The amount of interest accrues per day will increase to $1.93 : (0.068 / 365) X $ 10,340 = $ 1.93
  • Under most repayment plans, this capitalized interest will increase your monthly payment and the total amount you pay over the life of the loan.

Manage Your Expenses

Tips for Borrowing Responsibly

Borrow only what you need.

Consider using money earned at a part-time job to reduce borrowing. Money you don’t borrow in the first place is money you don’ have to pay back.

Make sure your budget is sufficient for the entire year, not just the next few months. You may only receive your funding a few times a year, so you may need to budget your funds over a period of time.

Limit your expenses

Rank your expenses and reduce the amount you spend on lower expenses.

  • Share housing
  • Buy used textbooks or rent textbooks
  • Take public transit or car pool
  • Explore ways to lower your cell phone bill
  • Choose less expensive entertainment options

Estimate What you will Owe and Earn