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Common Mistakes That Can Cost You When Dealing with Student Loans

Over the course of paying of their student loans, many student loan debtors make mistakes. Whether it's because they are uninformed and fail to take advantage of certain beneficial options or simply neglect certain responsibilities relate to the repayment of their loans, such mistakes may cost student loan debtors both time and money.

*Paying for student loan help

Ads on social media and the internet, as well as solicitations including phone calls or letters, may offer to help lower a student loan payment or apply for loan forgiveness. However, while these ads provide student loan assistance for a fee, the U.S. Department of Education or its loan servicers never charge for these types of services. They also do not charge application or maintenance fees. Consumers with student loan debt should contact their loan servicer for free student loan help and avoid these late-night TV scams.

*Choosing the wrong repayment plan

A repayment plan determines the monthly student loan payment and how long it will take to pay the loans back. Several repayment plans are offered by servicers but the decision and choice is dependent upon whether the goal is to pay off a loan quickly or to have a low monthly payment.

*Not setting up automatic payments

Student loan debtors should never miss a payment. One way to ensure this is to register for automatic payments through the loan servicer. By doing so, student loan debtors receive a 0.25% interest rate deduction.

*Not paying additional amounts over the payment amount when possible

Interest on a student loan accrues every day. Paying over and above the minimum monthly payment amount will save money in the long-term. To maximize any positive effect of making additional payments, student loan debtors should inform their loan servicer that it should not apply the extra payments to any future payments, and that it also should apply the payments to the highest interest rate loan. This will reduce interest, while reducing the total cost of the student loan over time.

*Paying late or missing payments

The worst thing that can happen is to stop paying on a student loan. Late or missed payments hurt your credit score and affect any future ability to obtain home and car loans. Missing multiple payments and defaulting could lead to the garnishment of wages or the withholding of a tax refund.

If overwhelmed or unable to afford your next payment, contact the loan servicer as soon as possible. They will inform you of any recommended options to reduce or postpone a payment and keep a loan in good standing.

*Postponing payments without first considering other options

Student loan debtors may postpone payments on student loans either through a deferment or forbearance. These options may provide help for debtors experiencing temporary financial hardship, but in the long run, they don't allow repayment of the loan.

In most cases, interest on a loan continues to accrue even while payments are postponed. When payments are resumed, the loan balance will be even higher than before.

Thus, before considering deferment or forbearance, make sure to consider other available options such as an income-driven repayment plan. If single and earning less than $1,486 per month, a monthly “payment” could be set at $0, which is technically what it would be with a deferment or forbearance. The benefit is that the government may subsidize some or all of the interest, and ultimately, because forgiveness of the loan is built into these plans, some future finality is established.

Student loans may have both short-term and long-term financial consequences and effects. Whether you are married or single, the experienced South Florida defense attorneys at Loan Lawyers are here to assist you in resolving any issues relating to the repayment of your student loans. To schedule a free consultation at any of our three conveniently located offices, contact Loan Lawyers today by calling (888) FIGHT-13 (344-4813).