Nothing says, “Welcome to adulthood” quite like getting your first student loan bill in the mail. If student loans are your reality, here are some tips that may help you (from someone who is going through this too).
I think everyone can agree that student loans are no fun to pay back, but ignoring them can have serious consequences (and it won’t make them go away.) If you’re worried about your student loans or don’t think you can afford your payments, contact us for help. No matter what your financial situation is, we can help you find an affordable repayment option. For many, that could mean payments as low as $0 per month.
Life after graduation gets real, real fast. To make a plan to tackle your student loans, you need to understand what money you have coming in, and what expenses you have going out. If you haven’t already, it’s important that you create a budget. This will help determine your repayment strategy. Here are some budgeting tips to help you get started.
There is no one-size-fits-all approach to paying back student loans. The key question you need to answer is: Do you want to get rid of your loans quickly or do you want to pay the lowest amount possible per month?
As a graduate student, I‘m no stranger to filing the Free Application for Federal Student Aid (FAFSA®), and when I filed my 2016-17 FAFSA, I was prompted to create an FSA ID—the username and password you need to log in to the FAFSA. I followed the step-by-step instructions, and voila! I easily created my very own FSA ID in no time!
More than 30 million FSA IDs have been created, and people, like me, have used their FSA ID more than 146 million* times. With any new process, there are some myths floating around about creating and using an FSA ID. Let’s tackle some of those right now…
When I was in my last semester of high school, I checked my family’s mailbox just as much as I checked Snapchat and Instagram combined. It was the season of admissions decisions, and I was getting letters from all the colleges I’d applied to.
But once I’d gotten into several schools, my attention shifted to my e-mail inbox. I was waiting on information that was just as critical: my financial aid offer from each college. I knew that for me, the amount of financial aid I got from a school mattered just as much as the general admissions decision. I’d fallen in love with each of the schools I’d visited, and I knew I’d be happy anywhere. Basically, my choice was going to come down to the money.
Analyzing different aid packages can seem like way too much math for the end of your senior year—at least it did to me—but it’s important stuff. Check out my four steps to make this analysis simpler.
What to do once you get an aid offer
1. Make sure you know what you’re looking at.
The financial aid offer (sometimes called an award letter) typically comes in an e-mail from the college’s financial aid office. The offer includes the types and amounts of financial aid you’re eligible to receive from federal, state, private, and school sources. Be sure you understand what each type of aid is and whether it needs to be paid back. For example, when I got into UNC-Chapel Hill, my aid offer was a mix of scholarships, which I didn’t need to pay back, and private loans, which I did. My offer from Duke (booooo) had mainly the same stuff with some grant money mixed in.
Click to download PDF.
Lucky for you, hundreds of colleges nationwide have signed on to present financial aid offers in a standardized format known as the Shopping Sheet. The Shopping Sheet is a standardized award letter template that makes it easy to compare financial aid offers from different schools. In addition to providing personalized information on financial aid and net costs, the Shopping Sheet also provides general information on the college, like graduation rate and loan default rate.
Today, more than ever before, a college diploma or job-training credential is one of the best investments you can make in your future. By some estimates, a bachelor’s degree is worth an average of a million dollars over the course of your lifetime.
But college also has never been more expensive, and far too many Americans are struggling to pay off their student loan debt.
Maybe you haven’t quite landed that dream job in your field of study yet. Or you decided to go into public service instead of taking the highest-paying offer. Your reward for investing your time and money in the skills and knowledge needed to secure your future shouldn’t be a sky-high monthly payment.
For Sarah, streamlining student loan repayment for easy access to affordable repayment plans is critical. Sarah teaches second grade in Minnesota, and works to ensure that all her students have hope for their futures and “know that the possibilities are endless for them.” After paying her monthly loan balance, she lives paycheck-to-paycheck. Public service loan forgiveness options are available to help make debt more manageable and affordable, but many teachers like Sarah struggle to learn about whether or not they qualify. The Obama Administration knows that families across the country are working hard to pay off their loans. This Administration wants to ensure that students do not have to choose between a job that serves their communities and paying their debt, and that borrowers like Sarah do not struggle to navigate student loan repayment. That’s why the US Department of Education is taking steps to reinvent customer service for federal student loan borrowers to ensure that every borrower has the right to an affordable repayment plan like Pay As You Earn (PAYE), quality customer service, reliable information, and fair treatment as they repay their loans – objectives the President put forward in his Student Aid Bill of Rights.
April is National Financial Capability Month. Decisions about paying for higher education can have lasting impact on individuals and our economy. In keeping with our ongoing efforts to increase financial literacy among college-bound and postsecondary students, the U.S. Department of Education (ED) is working with Treasury’s Financial Literacy and Education Commission (FLEC) to teach students how to save and manage money for their postsecondary education.
The Far-Reaching Impact of Financial Literacy
Financial literacy, which can be defined as an understanding of how to earn, manage, and invest money, has a critical impact on students’ ability to make smart choices about which institute of higher education to attend, what to study, how to pay for college, and how to manage student loan debt after graduation.
Generally, the first step in applying for financial aid is completing the Free Application for Federal Student Aid (FAFSA). The schools you listed on the FAFSA will take that information and use it to calculate the financial aid you’re eligible for. Your financial aid awards may vary from school to school based on a number of factors including: your Expected Family Contribution (EFC), the number of credits you will take each term, your cost of attendance (COA) at each school, your eligibility for state and institutional aid at each school, and your year in school. Keep in mind that many schools have a priority deadline, so the sooner you apply each year, the better. Here are 5 things that will help you better understand how financial aid is awarded:
We all know college is super expensive; not only do you have to pay tuition, but there’s also room and board (for those of you staying on campus), a meal plan (yay for cafeteria food…), and textbooks (buying hundred-dollar books for one chapter). It’s a lot. Luckily for us, there’s help: scholarships! Of course there’s no guarantee that you’ll actually be awarded any money, and sometimes it can seem like a whole lot of work for a whole lot of nothing. But that’s why I’m here! I’ve gone through the process recently (and am doing it again), and I’m at your service with suggestions and tips.
A lot of these tips come from StudentAid.gov/scholarships, so check out that page for a more comprehensive, detailed guide to scholarships.
Types of Scholarships
There are scholarships for almost everything—all you have to do is look. Applying for scholarships doesn’t have to be tedious—find scholarships for things you’re passionate about. Some scholarships are really cool. There are scholarships for animal rescue, volunteering with the elderly, etc.; you can find them through specific organizations, too.
Did you submit your 2016–17 FAFSA® before you (and your parents, if you’re a dependent student) filed your 2015 taxes? If so, it’s time to return to your application to update the information you estimated with the actual numbers from your 2015 tax return.
The easiest way to update your tax information is by using the IRS Data Retrieval Tool (IRS DRT). It allows you to transfer your tax information directly into your FAFSA! Check to see if your tax return is available and if you’re eligible to use the tool. You usually have to wait a few weeks after filing your taxes before you can use the IRS DRT, but this tool can save you lots of time.
Students: Log in to the FAFSA using your FSA ID. Parents: Your child must initiate the FAFSA correction process by logging in first, continuing to Step #3, and creating a Save Key*. If you need to make corrections to your child’s FAFSA, get the Save Key from your child. Once you do, you can log in by entering the student’s information. The FAFSA will ask you to enter the “Save Key” if you wish to continue.
*A Save Key is a temporary password meant to be shared between you and your child. It lets you and your child pass the FAFSA back and forth and allows you to save the FAFSA and return to it later. This is especially helpful if you and your child are completing the FAFSA, but are not in the same place.
Click Make FAFSA Corrections.
Navigate to the “Financial Information” section.
Change your answer from “Will file” to Already completed.
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If you’re eligible to use the IRS DRT, you’ll see a Link to IRS button. If you’re not eligible to use the IRS DRT, you can manually enter the data from your completed tax return.
Click Link to IRS and log in with the IRS to retrieve your tax information.
Enter the requested information exactly as it appears on your tax return.
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Review your information to see what tax data will be transferred into your FAFSA.
Check Transfer My Tax Information into the FAFSA, and click Transfer Now to return to the FAFSA.
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Review the data that was transferred to your FAFSA, and click Next.
Sign and submit your updated FAFSA using your FSA ID.
Once you’ve made updates at fafsa.gov, your changes will be processed in about three days. You’ll receive a revised Student Aid Report (SAR) showing the changes made to your application. Each school you listed on your FAFSA can access the revised information one day after it’s processed.
Remember, some state and school financial aid is awarded on a first-come, first-served basis. So, log in today to update your FAFSA!
April Jordan is a senior communications specialist at Federal Student Aid
A college or career school education = more money, more job options, and more freedom. Yet, with more than 7,000 colleges and universities nationwide, deciding which college is right for you can be difficult. Maybe you want to find a school with the best nursing program, or study abroad options, or the best college basketball team; every person values different things. However, it’s also important to remember that college is one of the biggest financial investments you will make in yourself. Just as important as academics and extracurricular activities are the financial factors: how much a college costs, whether students are likely to graduate on time, and, if alumni are able to find good jobs and pay off their loans. That is why the U.S. Department of Education developed the College Scorecard. It provides clear information to answer all of your questions regarding college costs, graduation, debt, and post-college earnings.
As you’re comparing colleges, use the College Scorecard to compare these four things:
1. Net Cost
For starters, you should consider how much you’ll actually be paying on an annual basis. That’s not necessarily the sticker price, but it’s the sticker price minus all of the scholarships and grants that you will receive when enrolling in an institution. This is called the net price, and it’s important because it’s the average amount students actually pay out of pocket.The College Scorecard can show you the average net price of each school compared to the national average. It can also give you a net price estimate for each school broken down by family income. Here’s an example:
Student loans, interest payments, and taxes: three things that have scared many people for years now. Read on to learn how these things can benefit you. Just as Dorothy, the Scarecrow, the Cowardly Lion, and the Tin Man learned when they followed the yellow brick road, once you look at the bigger picture you’ll realize you had the resources to face your fears all along!
If you made federal student loan payments in 2015, you may be eligible to deduct a portion of the interest paid on your 2015 federal tax return. This is known as a student loan interest deduction. Don’t miss out on this opportunity to make the money you’ve paid work for you! Below are some questions and answers to help you learn more about reporting student loan interest payments from IRS Form 1098-E on your 2015 taxes and potentially get this deduction.
What is IRS Form 1098-E?
IRS Form 1098-E is the Student Loan Interest Statement that your federal loan servicer will use to report student loan interest payments to both the Internal Revenue Service (IRS) and to you.
Will I receive a 1098-E?
If you paid $600 or more in interest to a federal loan servicer during the tax year, you will receive at least one 1098-E.
The IRS only requires federal loan servicers to report payments on IRS Form 1098-E if the interest received from the borrower in the tax year was $600 or more, although some federal loan servicers still send 1098-Es to borrowers who paid less than that.
If you paid less than $600 in interest to a federal loan servicer during the tax year and do not receive a 1098-E, you may contact your servicer for the exact amount of interest you paid during the year so you can then report that amount on your taxes.
How many 2015 1098-Es should I expect to receive?
That depends on how much you paid in interest, how many federal loan servicers you had, and some other factors. Read through the scenarios below to find where you fit and know how many 2015 1098-Es you should expect.
Your current servicer was your only servicer in 2015: In this case, your current federal loan servicer will provide you with a copy of your 1098-E if you paid interest of $600 or more in 2015. Your servicer may send your 1098-E to you electronically or via U.S. mail.
You had multiple servicers in 2015: In this case, each of your federal loan servicers will provide you with a copy of your 1098-E if you paid interest of $600 or more to that individual servicer in 2015. Your servicer may send your 1098-E to you electronically or via U.S. mail.
If you paid less than $600 in interest to any of your federal loan servicers, you may need to contact each servicer as necessary to find out the exact amount of interest you paid during the year.
How will reporting my student loan interest payments on my 2015 taxes benefit me?
Reporting the amount of student loan interest you paid in 2015 on your federal tax return may count as a deduction. A deduction reduces the amount of your income that is subject to tax, which may benefit you by reducing the amount of tax you may have to pay.
Now that you know student loans, interest rates, and taxes aren’t as scary as you may have originally thought, you are ready to report your student loan interest rates on your 2015 federal tax return!
But what if I still need help or have more questions?
While we are not tax advisors and cannot advise you on your federal tax return questions, your federal loan servicer is available to assist you with any questions about your student loans, including questions about IRS Form 1098-E and reporting the student loan interest you’ve paid on your 2015 taxes. If you’re not sure who your loan servicer is, visit My Federal Student Aid to find contact information for the loan servicer or lender for your loans. To see a list of our federal loan servicers, go to the Loan Servicers page on StudentAid.gov.
Noemi Solares is a Management and Program Analyst at Federal Student Aid.
If you borrowed before July of 2010, you may need to consolidate your loans in order to qualify for certain student loan repayment benefits, such as Public Service Loan Forgiveness and some income-driven repayment plans.
Why does it matter which type(s) of loans I have?
If you’re interested in the best student loan repayment benefits, you’ll want to have Direct Loans. If you borrowed any federal student loans before July 2010, there’s a good chance that some or all of your federal student loans are not Direct Loans. But that doesn’t mean you can’t qualify for the best repayment benefits—you can. All you’ll need to do is consolidate. If you consolidate, as a student borrower, here are some of the repayment benefits you could access:
Direct Loans are those that are made to you, though your school, directly by the Department of Education. Since July 2010, almost all federal student loans are made under this program—in full, called the William D. Ford Federal Direct Loan Program.
Though the Direct Loan Program existed long before 2010, there was another bigger federal student loan program that most students relied on to finance their education: the Federal Family Education Loan (FFEL) Program.
Under the FFEL Program, loans were made by banks and ultimately guaranteed by the taxpayer in case you didn’t make your payments. In 2010, this program ended.
Loans from both of these programs are FEDERAL student loans. The main way the programs differ is in who made you the loan in the first place. Most of the benefits in the Direct Loan Program are available in the FFEL Program. However, FFEL Program loans are not eligible for Public Service Loan Forgiveness or the best income-driven repayment plans. This is where loan consolidation can help. It will effectively convert your FFEL Program loans into Direct Loans.
How do I find out which type(s) of federal student loans I have?
Log in using your FSA ID (You can’t use your Federal Student Aid PIN anymore!)
Scroll to the loan summary section. Go through each of the loans that are listed. Use the list below to see if you need to consolidate any of your loans to qualify for the best repayment options.
What should I consider before consolidating?
First, evaluate whether you want any of the benefits that are available only in the Direct Loan Program. Consolidating your loans can increase the amount of interest that accrues on your loans, so if you’re not interested in these programs, you may not want to consolidate. Also, understand that, by consolidating your loans, you will start your forgiveness clock over. For example, if you were already on an income-driven repayment plan and consolidate your loans, then you will lose the any credit you had already earned toward forgiveness.
Lastly, understand that some of the loans that we called out for consolidation are those from another federal student loan program called the Federal Perkins Loan Program. Those loans have their own cancellation benefits that are based on your job. If you consolidate these types of loans, you will lose access to those cancellation benefits. Learn more about Perkins Loan cancellation here.
Now I know what type(s) of loans I have. What can I do?
I have some loans that I need to consolidate, and some that I don’t. Okay, you’re a little trickier to advise. You’ll definitely have some loans that you’ll want to consolidate, but the real question is, should you consolidate all of your loans? Only consolidate what you need to? You can do either. It will be easier to keep track of your loans if you only have one, but as you can see in the above section, sometimes you’re better off not consolidating if you don’t have to. After you’ve figured this out, you can consolidate your loans and apply for the best income-driven repayment plans. After you’re set up on the plan you want and if you want to apply for Public Service Loan Forgiveness Program, get your employment certified for Public Service Loan Forgiveness.
If you’re confused, need help, or have questions, you can contact the Loan Consolidation Information Call Center at 1-800-557-7392 to get free advice.
Ian Foss is a Program Specialist and Nicole Callahan is a Digital Engagement Strategist at the U.S. Department of Education’s office of Federal Student Aid.