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How Not to Get Burned Paying Back Your Student Loans – Investopedia

Once you are finally ready to make payments on your student loans, it might seem like a pretty straightforward thing to do—just start paying, right? But depending on when you pay and even when you don’t pay, you can get burned and end up owing your lender way more money than you assumed you would. 
So how do you make sure that you end up paying exactly what you’re supposed to? Here are five tips to help you get started.
It is never too early to start paying back your student loans, even if you haven’t yet graduated. Most lenders give borrowers a six- to nine-month grace period from when you graduate or leave school until when you need to start paying your loans back. The grace period is there to help you to find the right repayment plan that fits your needs and land a job so you are more financially stable. 
However, just remember that during any grace period, interest is still accumulating on your loan and the amount that you owe is climbing. So, forget waiting for the grace period to be over; instead, start paying your loan back as soon as possible. If you’re working a part-time job, consider taking even 10% of your paycheck to pay down your debt. Chipping away at it when you can will definitely help in the long run. 
If you are waiting to see what the current presidential administration will do about loan forgiveness, you should still continue to make payments to reduce your balance.
No matter when you choose to start paying your loan, do not miss your monthly due date. If you do, you will be charged a late fee, which ends up taking more money out of your pocket. On top of that, any payments more than 90 days late will be reported to the relevant credit bureau. That might not directly affect the amount of your student loan payments, but multiple late payments can lower your credit score and, as a result, affect your future loans and interest rates. The higher the interest rate on any loans you take, the more you’ll pay.
The U.S. Department of Education has extended the student loan payment pause through Dec. 31, 2022, meaning that there is currently a suspension of loan payments, a 0% interest rate, and a halt on collections. If you have any financial means to continue paying, consider taking advantage of this opportunity to knock down your balance without interest being added to your balance.
After marrying, many couples combine their incomes into one joint bank account to pay the bills. Thus, it makes sense that they may want to combine both of their student loans into one payment as well. While that will mean just one bill and a single payment, you may wish to consider otherwise.
Nobody wants to think about this during wedded bliss, but if you were to get divorced or your spouse were to pass away, you could be left with the financial responsibility of the entire bill and only one income. In addition, consolidating your student loans might cost you certain tax benefits or forgiveness loans. If you are interested in a consolidation loan, make sure to read the fine print before signing on the dotted line, so you know exactly what you are responsible for if tragedy strikes.
When it is time to pay, you will have a variety of payment options to choose from. For example, a standard repayment plan consists of equal payments over 10 years, while income-driven repayment plans are pay-as-you-earn.
Keep in mind that the payment plan with the lowest monthly payment might be what you can afford right now, but it will take you longer to pay off the loan, and you will pay much more in interest. Closely review each option and see what best suits your financial needs and keeps the most money in your pocket, not your lender’s.
Sometimes, not getting burned starts way before you even get your student loan. Borrowing too much money or not searching for the best interest rates can you cost you thousands in additional interest that you’ll pay back to the lender. Do your due diligence and shop around. Choose several lenders and compare the interest rates they offer with what the government offers for their student loans.
Don’t throw money out the window. Make sure you read any promissory notes before signing so you understand how to pay back your student loans, what fees you may accrue if your payment is late, and other details that can cost you money. The idea is to pay off your loan efficiently and effectively while keeping as much money in your pocket as you can. The last thing you want is to be surprised by fees or penalties because you didn’t read the contract or follow the instructions.

Consumer Financial Protection Bureau. “When Do I Need to Start Paying My Private Student Loans?
Federal Student Aid. “Student Loan Repayment.”
Federal Student Aid. “Student Loan Delinquency and Default.”
The White House. "Fact Sheet: President Biden Announces Student Loan Relief for Borrowers Who Need It Most."
Federal Student Aid. “Student Loan Consolidation Page.”
Federal Student Aid. “Repayment Plans Page.”
Federal Student Aid. “Master Promissory Note (MPN).”
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