Many students in college today use different forms of digital media to keep up with their tasks and homework to complete for school.
Some even use different forms of digital media to send money to other people for different occasions. Still, though, students in college today are sent many emails containing updates about financial aid for students in college today.
Student loans deserve the same level of digital organization.
The amount of information related to a single loan can become very confusing. For example, a single student might have loans from different semesters of school. Some of the loans might have different interest rates, or be from different lenders.
Each loan would have a different balance, and repayment terms. Without tracking of the information, all of the emails and account tracking pages could become overwhelming.
Now that we have looked at a number of different digital tools for managing your financial situation as a college student, it is time to look at how we can use some of these same tools to manage your student loans.
While there are no digital tools that can pay off a student loan for you, there are a number of tools that can help you keep on top of your situation and be better prepared for repayment after graduation.
Create One Complete Record of Every Loan
The first step is to gather all loan information in one place.
A student should create a simple document or spreadsheet to track all of their current loans. A simple document or spreadsheet would include all of the following information for each loan:
- The name of the lender or loan servicer
- Whether the loan is federal or private
- The original amount borrowed
- The current balance
- The interest rate
- The expected repayment start date
- The estimated monthly payment
- The account login page
- Contact information for the servicer
These are typically supplied by a school’s financial aid office in a variety of forms, including print and online, and may include links to individual loan providers’ websites.
A student would then need to set up online accounts with each lender, or review a single spreadsheet they created which lists all of their individual loans and corresponding financial information.
I have included information on when the documents should be updated in the next section. Although the student may graduate prior to when all of the additional loans that he/she took out are due to start repayment, it is best that the student adds each of these loans as soon as they are taken out.
A simple spreadsheet is often enough to create a complete overview of a student’s debt. It doesn’t have to include complex formulas or features.
Use Official Dashboards to Confirm Loan Details
The numbers that a third-party budgeting tool provides for your outstanding loans should always be checked against the lender’s or servicer’s website for the most up-to-date and accurate repayment information.
Federal student loan borrowers should refer to the Federal Student Aid (FSA) for more information on federal student loans, such as the ability to review all of a borrower’s federal aid, find all of the borrower’s loans, research different repayment options, and manage the borrower’s payments.
Budgeting Apps Sometimes Miss Critical Details. Private loans, in particular, need to be checked on the lender’s or servicer’s website.
Although budgeting apps may provide an estimate of your remaining balance, the information in the app usually will not be up to date for payment amounts, due dates, and other account details.
It’s also important to verify that the servicer has your correct mailing address as well as your email address to ensure that you receive any notices pertaining to your loans and repayment.
Why should you check official dashboards during the final year of college at the latest? During freshman year of college, repayment of student loans may seem far away. But before you know it, graduation will have arrived.
Use Budgeting Apps to See How Loans Fit Into Real Life
In addition to repayment amount and term, also consider how a loan payment will fit into a broader budget including items such as rent, groceries, and payments for other debts including credit cards, car, and student loans.
Budgeting Apps to See How Loans Fit Into Real Life The student budget is a tool that can be used to see how much room there will be in a future budget for a loan repayment. Before finding out what their first salary after graduation will be, the student can make up several possible budgets.
For example, a student might develop a budget for an entry level job, for a part-time job, and for a series of months of job searching until he or she finds full time work.
Looking at a future payment in this manner will help the student to assess whether or not it can be managed given the realities of their post-graduation life.
Students should create budgets based on net (take-home) income rather than gross (pre-tax) income, because of taxes, insurance, retirement and other factors that will be deducted from their income before it is deposited into their checking account.
Budgeting is most effective when completed using realistic budget numbers versus “wish list” numbers.
Compare Scenarios Before Refinancing or Changing Plans
Digital calculators are ideal to test and compare different repayment options before making a decision.
For example, a student can use a refinance calculator to compare the terms of several different lenders. The estimated monthly payment, interest charged, and length of time until loan is repaid for each of the different rate and term options can be useful to get a sense of what to expect, but be sure to actually read through the details of any loan that you are considering refinancing, since the numbers that calculators spit out can sometimes be misleading.
A lower monthly payment does not necessarily mean that you are in a better situation as the interest is likely to be higher as the loan will be repaid over a longer period of time.
Note to federal loan borrowers. Refinancing a federal loan into a private loan will result in the loss of federal benefits including certain types of income-based repayment options, and deferment protection. Borrowers will also lose access to qualifying programs of loan forgiveness.
Students and young adults with federal loans should be extremely cautious when considering the refinancing of their federal student loans into a private student loan.
Remember, a calculator is only a tool. It is supposed to help borrowers weigh the pros and cons of their various repayment options.
Turn On Automatic Payments, but Continue Monitoring
Yes, Automatic payments can be set up. These are particularly useful to recent graduates who have been to move to a new town, to start a new job. And recently set up in a new home, with new monthly outgoings and other bills to pay.
However, just setting up automatic payments is not enough to prevent missing of a payment. Students and graduates need to monitor their payments and account information.
Even with automatic payments, be sure to review your transactions to be certain your payment was made (and that it was made correctly and on time).
A payment will fail for a variety of reasons, including: payments made from accounts that have since expired, payments made from accounts that have since been closed, and errors made by the lender in the application of extra payments.
Before enabling automatic payments, students should confirm:
- The withdrawal date
- The expected payment amount
- The connected bank account
- The policy for insufficient funds
- How additional payments are applied
Also, be sure to keep a small amount of money in the payment account as withdrawals can cause overdrafts and incur additional fees.
Digital Tools Work Best With Consistent Habits
No single app can manage student debt without input from the borrower.
Calculators, spreadsheets, calendar alerts, and dashboards for example can estimate costs and organize information for a student with debt, remind a student of a repayment date, and give a student up-to-date information about their loans, respectively.
In summary, the simplest and most effective loan management system is a plan, made up of the information and tools that students can maintain and update.
