Once you know when you are required to begin making payments on your loans and what the suggested minimum payment is, you need to determine what would be a reasonable monthly payment for you. Minimum payments will vary, depending on the amount of your loans and the length of the loan. At any time, you can pay more than the minimum monthly payment on Stafford Loans without risk of being penalized. You may also pay off your Stafford Loans in their entirety at any time without penalty. There are advantages and disadvantages to repaying your loans ahead of schedule. Consult your financial aid advisor to determine what is right for you and your situation. A student loan repayment calculator(www.ed.gov) also might be helpful.
While it may seem ideal to repay your loans before they are due, it is not always a realistic option. There may come a time when you can not make the monthly payment.
Understand the Pros and Cons of Deferment and Forbearance
Certain circumstances may arise throughout the life of your loan that hinder your ability to make payments. If you are at least a half-time student at a post-secondary school, studying in an approved graduate fellowship program or in an approved rehabilitation program for the disabled, or unable to find full-time employment you may qualify for deferment. As soon as you recognize that you cannot pay your loans contact your lender immediately and seek assistance. In most cases, you are not automatically granted a deferment. You must request one through the procedures set forth by your lender.
If you do not qualify for deferment, but need assistance, your lender may be able to offer you a temporary postponement or reduction in your repayment obligation. This is referred to as Forbearance. For example, you may be allowed to simply make a monthly interest payment for a period of time or accrued interest may be added to your principal once the Forbearance period is over. Federal student loans provide for up to three years of deferment and three years of forbearance available to help you during times of financial hardship.
The government's Student Aid Web site(studentaid.ed.gov) provides more information about different kinds of deferments and forbearance.
Avoid Default and Delinquency
If you cannot make your minimum monthly loan payment, it is your responsibility to notify your lender immediately. You do not want to be delinquent in paying your loan. Failure to make a payment within 270 days will put your loans into default. If you default your loans or fail to uphold your end of the loan terms, there are severe consequences. For example, your loans may be turned over to a collection agency. You may lose deferment eligibility and eligibility for future federal and state financial aid funds. Your credit rating may be adversely affected and your wages may be garnished until you repay your loans.
Use Reminder Systems and Electronic Billing
As a new physician you can count on being very busy. Paying your bills may slip your mind in the midst of a full day seeing patients. Forgetting to pay your loans, even for one month, can cost more than a late fee. Poor management of your loans can impact your ability to qualify for business loans, home loans and other types of credit. Managing your loans has never been easier thanks to electronic billing, often known as electronic funds transfer (EFT), and Internet banking. Using these services to make timely payments not only saves you the hassle of postage, envelopes and mailing delays, it makes bill paying convenient for busy people like you. Ask your lender or financial aid advisor about these payment options.
If your lender insists on sending you a monthly bill via the mail, put a reminder note on your calendar or PDA at least two weeks in advance of the due date and make sure your payment is mailed at least one week before it is due to the lender. You can also purchase reminder software or sign up on one of the many Web-based services that you can program to send reminders to your e-mail address, telephone, or pager.
Review Income-Based Repayment (IBR) Option
As of July 1, 2009, students with federal loans can apply for a new loan repayment option called Income-Based Repayment (IBR). According to the IBRinfo Web site(www.ibrinfo.org), the new program "can help borrowers keep their loan payments affordable with payment caps based on their income and family size." Applications are now available on the U.S. Department of Education's Web site(www.ed.gov).