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Welcome: How The Online Counseling Session Works

Types of Loans You May Have

Step One: Understanding Your Responsibilities

Step Two: Preparing to Pay Back Your Student Loans

Step Three: Payment Plans and Billing Procedures

Step Four: Loan Deferment, Forbearance and Cancellation Benefits

Step Five: Loan Consolidation May Be Helpful

Step Six: Avoiding Delinquency and Default

Step Seven: Budgeting and Managing for a Successful Future

Step Eight: The Importance of Staying in Touch

Step Seven: Budgeting and Managing for a Successful Future

Now that you are leaving the University of Washington, it is time for you to begin paying back your student loans. In addition to your loans, there will be many other financial responsibilities in your life. Debt management - successfully managing your loan repayments, credit card debt, and expenses like rent or mortgage and food - is key to your financial future. Here are some helpful hints for planning and budgeting after college.

Create a Budget

A budget is a tool that can help you manage your money, no matter how much (or little) you may have. It will help you track your spending so that you are in control! A budget should be realistic and accurately reflect your lifestyle and spending priorities. Use anything from a computer program to a scrap of paper - whatever works for YOU!
  • To begin your budget, start by listing all your sources of income, no matter how small.
  • Next, list all your expenses. Take a week, a month or six months and list all of the expenses that occur - these could be anything from daily coffee to rent payments. Whatever you spend your money on, write it down.
  • Review and modify your budget. Make a distinction between your fixed expenses (those that are predictable) and your variable expenses. You will become frustrated if you try to stick to a budget that doesn't work for you. Try it out... if you need to make changes, make only a few at a time.

Manage Your Debt

Whether it is your student loan or a credit card balance, debt usually requires payment of interest charges. Keep in mind that payments you make are first applied to fees (if any) and accrued interest. After these charges are completely satisfied, the rest of your payment will be used to reduce your principal balance. If you can afford more than the minimum payment required, pay down your debt with the highest interest rate first to save the most money.

The Power of Loan Pre-Payments

There are no penalties for making extra payments on your student loans, in any amount you choose. If you can work even a small amount of extra payment into your budget (above your minimum payment amount), you will reduce your total interest costs and the total number of payments needed to retire your loan.

For example, on a $3,500 loan at 5% interest, paying just an extra $10 a month can reduce your interest paid. See the table below.

Loan Amount Interest Rate Payment Amount Total Payments Required Total Interest Paid
$3,500 5% $40 per month 109 payments $862.43
$3,500 5% $50 per month 83 payments $646.72

In this example, you would pay off your loan 26 months ahead of schedule (over two years early), and save a total of $215.71 in interest charges - for just $10 extra per month! And the more you can afford to pre-pay, the greater your savings.

Keep Good Records

Although your lenders are required to keep records of all your loan transactions, it is important that you also keep accurate records for all your financial business. Create your own system for storing your loan documents, including your loan disclosure statement and Statement of Rights & Responsibilities included in this exit counseling session. As you repay your loan, keep good records of your payments and any correspondence you have with your lender(s).

Learn About Personal Finance

Educate yourself in the area of personal finance. There are many money, credit and debt management sources available both on the internet and in the library, with ideas for successfully managing your finances.

Build a Good Credit Rating

If you learn to effectively manage your financial obligations, you will build a positive credit rating that may open doors to you in your future. The keys to building good credit are:
  • Pay at least the minimum due on every bill you receive - but pay more if you can afford it.
  • Mail your payments before the due date, to insure they are received on time.
  • Keep your billing address current with all your creditors to avoid lost statements that may cause you to pay late.
  • Don't overload on credit now, thinking you will have a high-paying job later.
  • Don't treat available credit lines as extra income - in fact, creditors often consider too much available credit as potential debt!
  • Don't exceed the credit limit on your credit cards.
  • Set up Automatic Direct Draft (ADD). This automatically deducts your loan payment from your checking or savings. (Only available with financial institutions in the U.S.)
  • Yes, it does matter if you pay late "every now and then".

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