For many students, the Stafford student loan program has helped make it possible for them to pursue higher education. The average Kutztown University undergraduate student completes school with approximately $19,000 in Stafford loan debt. An increasing number of students owe even more by borrowing additional unsubsidized loan amounts when their parents have been denied PLUS loans. Also, the private alternative loan volume, with the student as the borrower, has surpassed two million dollars annually at Kutztown University, and is used by many students to pay for educational costs not covered by other sources of aid.

Add the enormous popularity and ease of availability of credit cards into this mix, and it stands to reason that an aggressive debt management program is necessary to help students keep their debt under control and their credit intact. From first-time freshmen to graduating seniors, many students rely on their parents to take care of the paperwork and are unaware of the magnitude of the debt they have acquired. Students need to be conscious of their debt and plan how to manage it from the first time they borrow.

STUDENT LOAN REPAYMENT

Grace Period
After you graduate, leave school or drop below half-time enrollment, you have a six-month grace period before you must begin to repay your loans. A grace period applies to all Stafford Loans. (For subsidized Stafford loans, no interest accrues during this period. With unsubsidized Stafford loans, the interest continues to accrue during this time.)

You have certain Rights & Responsibilities as a Borrower. You are responsible for repaying your student loans even if you do not graduate, have trouble finding a job or are dissatisfied with your education. Ask your lender or servicer about the following repayment options. Also, communicate with your lender or servicer to discuss alternatives if you are experiencing difficulties.

Standard Repayment Schedule
Graduated Repayment Schedule
Income Sensitive Repayment Schedule

All federal education loans allow prepayment or paying all or part of your loans at any time without penalty. The advantage of prepaying is that it will substantially decrease interest owed.

LOAN CONSOLIDATION

Consolidation permits eligible students who are finished with their education to combine repayment of various loans into one monthly payment.

• Reduces amount of monthly payment.
• Lengthens repayment term.
• Make one monthly payment to one place.

Contact your lender or loan servicer for more information. These agencies provide loan consolidation:
AES/PHEAA Network Loan Consolidation 1-800-338-5000
Sallie Mae Smart Loan Consolidation Account 1-800-448-3533

HAVING TROUBLE MAKING PAYMENTS?

Deferment is an arrangement in which principal and/or interest payments are postponed.
The government pays the interest on subsidized loans in deferment.

• In school at least half-time, Graduate fellowship or rehabilitation training (no time limit)
• Unemployment (3-year limit)
• Economic hardship (3-year limit)

Forbearance is a temporary postponement or reduction of monthly payment obligations due to financial hardship. Interest continues to accrue while the loan is in forbearance. A forbearance is typically granted in 12-month intervals for up to three years and is granted at the lender’s discretion.

• Discretionary
• Reduced payment
• Economic hardship

Delinquency
Failure to make loan payments on time results in the loan becoming delinquent. If you are over 60 days late in making your payments, your delinquency will be reported to national credit bureaus. A missed payment will not put a loan into default but it does appear on your credit record and may affect your ability to obtain additional credit. The worst thing you can do is miss a payment or be habitually late in making your payments. If you are having trouble making a payment, it is better to contact the servicer of your loan and explain your situation. The servicer may be willing to renegotiate the amount of your monthly payment or grant a financial hardship forbearance.

Default
When a student loan delinquency reaches 270 days past the due date of payment, the loan is declared in default. Default has serious consequences that will affect your ability to borrow money for future purchases. If you experience financial problems, do not ignore your obligation to repay your student loan. Contact your loan’s servicer before you default on your loan and ask what options you may have. Ask to find out if you qualify for a deferment or a forbearance. Could your repayment schedule be converted to a different repayment option? Consider consolidating your loans to reduce the size of your monthly payment and extend the term of the loan. Protect your creditworthiness and make a good faith effort to stay on track by keeping in touch with your lender or servicer.

PHEAA’s YouCanDealWithIt.com offers information about personal finances, debt management, loan repayment, car shopping, budgeting tips and more. The site is a comprehensive guide to decisions and situations that students will encounter and resources to help deal with them.

Credit Reports
When you use credit, you create your own credit history. When you apply for credit again, a new creditor will check your history. Your credit report is based on your payment history (on-time and late) gathered from banks and other creditors. Education loans appear on your credit report. A credit report is used to judge whether or not you qualify for a credit card, car loan, mortgage or any other type of credit. You have a legal right to a copy of your personal credit report. The following credit reporting agencies will have a file on you. There is a fee, but if you have been denied credit recently, it may be free of charge.

Experian Information Solutions (formerly TRW)
1-888-397-3742
www.experian.com

Equifax
1-800-997-2493
www.equifax.com

TransUnion
1-800-916-8800
www.transunion.com

Look in your bag after a visit to the campus bookstore and you’re likely to find a credit card application tucked inside. Most students find that securing a credit card is quick and easy. But before you accept the offer, ask yourself, do you really need a credit card? Click here to weigh the pros and cons of using a credit card and check out tips for good credit to be a smart consumer.

How much do credit cards really cost you? Click here to see how long it would take to pay off the average bank card balance of $1,100 while making only the required minimum monthly payment.

Click here find out how credit cards work, how much credit you can afford, and how to tell if you’re heading for trouble.