Paying Off My Student Loans: A Dever University Story

The University of Denver offers a range of financial aid options for students, including federal and private loans, scholarships, and work-study programs. The cost of attendance (COA) includes tuition, fees, books, supplies, health insurance, and living expenses. Students can apply for financial aid by submitting the Free Application for Federal Student Aid (FAFSA) and using the school code #004508. Additionally, the university provides resources to help students understand their rights and responsibilities as borrowers, such as exit counseling. Understanding repayment plans, the consequences of default, and federal student loan dispute resolution are critical for maintaining financial health.

The debt snowball method

Step 1: List your debts from smallest to largest.

Regardless of interest rates, list all your debts and arrange them in order of balance size, with the smallest balance at the top. This list will help you visualize your debt repayment journey and keep you motivated as you gradually pay off each debt.

Step 2: Make minimum payments on all your debts except the smallest one.

Ensure you make at least the minimum monthly payments on all your debts to avoid late fees and penalties. This step is crucial to maintain your credit score and stay in good standing with your lenders.

Step 3: Put all your extra money toward paying off the smallest debt.

Focus on aggressively paying off the smallest debt on your list by throwing as much extra money as possible at it. While continuing to make minimum payments on your other debts, channel any additional funds toward eliminating this smallest debt as quickly as possible.

Step 4: Repeat the process with the next-smallest debt.

Once you've paid off the smallest debt, take the money you were using for that payment and roll it into the payment for the next-smallest debt on your list. By doing so, you gain momentum and accelerate your progress in reducing your overall debt.

Step 5: Continue the snowball effect until all debts are paid off.

Keep repeating steps 3 and 4 until you have paid off all your debts. With each debt you eliminate, you free up more money to put toward the next one, creating a snowball effect that gains size and speed as it rolls downhill.

Federal Direct Subsidized/Unsubsidized Loans

Federal Direct Subsidized Loans

These loans are offered to students who are deemed to have a financial need. The U.S. Department of Education pays the interest while you're enrolled at least half-time. Interest also won't accrue during your six-month grace period after you leave school.

Federal Direct Unsubsidized Loans

These loans are available to all students, regardless of financial need. Interest starts accruing from the date of your first loan disbursement, so it's a good idea to pay the interest while you're in school, even if you're not making monthly payments.

How to Apply

To apply for either loan, you must first complete and submit the FAFSA form. Your school will then determine how much student aid you can receive as part of your financial aid package. You don't have to accept all the student loans offered to you, and you can request a lower loan amount.

Private Education Loans

Private student loans should only be considered when federal loan options have been exhausted, as federal loans are less expensive and offer better terms. However, private loans can offer more flexible repayment options than federal loans.

Many private lenders offer private student loans, and it is important to compare loan offers from multiple lenders to find the lowest interest rate. Some things to consider when looking at private student loans are:

• Fixed or variable interest rates
• Borrower protections such as deferment and forbearance
• Repayment options
• Loan term
• Credit score and income requirements
• Citizenship status
• School accreditation
• Enrollment and academic standards
• Debt-to-income ratio minimum

Loan Forgiveness & Cancellations

Loan forgiveness programs promote careers in fields that are underserved or fields that meet particular community needs. Depending on your situation, all or a portion of your loans may be canceled or forgiven through these programs. Here are some of the loan forgiveness and cancellation programs available:

Public Service Loan Forgiveness

Under the Public Service Loan Forgiveness (PSLF) Program, you can qualify for forgiveness of the remaining balance due on your federal student loans after you make 120 payments while employed full-time by certain public service employers. The 120 required payments need to be made under the Direct Loan Program. All income-driven repayment plans are eligible for PSLF.

Teacher Loan Forgiveness

The Teacher Loan Forgiveness Program is intended to encourage individuals to enter and continue in the teaching profession. Under this program, individuals who teach full time for five consecutive, complete academic years in certain elementary and secondary schools that serve low-income families and meet other qualifications may be eligible for forgiveness of up to a combined total of $17,500 in principal and interest on their FFEL and/or Direct loans.

Perkins Loan Cancellation

In certain cases, all or a portion of your Perkins loan can be canceled. Perkins loans can be canceled for service as a full-time teacher in certain areas, a full-time librarian, law enforcement, public defender, firefighter, full-time nurse or medical technician, full-time family service provider, for certain military service, and for Peace Corps or ACTION volunteers.

Inability to Make Payments

If you think you will have trouble making your loan payments, be sure to contact your lender or servicer immediately. They can help you change your payment plan to one that better fits your budget, or discuss deferment or forbearance options that will allow you to postpone your payments.

Repayment plans

Understanding Repayment Plans

Before choosing a repayment plan, it is essential to have a solid understanding of the available options, the hazards of default, and how to resolve any disputes related to federal student loans. The Federal Student Aid website is a valuable resource for this information. Additionally, for private education loans from banks or credit unions, borrowers need to contact their lenders directly to learn about specific repayment options and timelines.

Completing Exit Counseling

When a student is no longer enrolled, they must complete exit counseling, which helps them understand their rights and responsibilities as a borrower. This process can be done online through StudentAid.gov and typically takes about 30 minutes. It provides useful tips and information to manage loans effectively.

Grace Period and Repayment Start

After graduating, leaving school, or dropping below half-time enrollment, borrowers are entitled to a six-month grace period for Direct loans. During this time, no payments are required, but interest continues to accrue on most loan types. Any unpaid interest is capitalized and added to the loan principal when repayment begins. Repayment starts the day after the grace period ends, and the first payment is typically due within 60 days. It is important to pay attention to any communication from the loan servicer regarding repayment.

Identifying Loan Servicers

Knowing who services the loans is crucial, as borrowers will work directly with them throughout the repayment process. The Federal Student Aid website provides comprehensive information about federal loan history, including servicer contact details, loan totals, and loan status. It is important to note that this website only displays federal loan information, and private education loans will appear on credit reports.

Standard Repayment Plan

The standard repayment plan is the default option set up by the loan servicer. It typically has a fixed repayment period, such as 10 years, with a minimum monthly payment amount. This plan may be suitable for borrowers who can afford the payments and aim for a faster loan payoff.

Income-Driven Repayment Plans

For those seeking lower monthly payments, income-driven repayment plans are available. These plans base the monthly payment amount on a percentage of the borrower's discretionary income. Examples of such plans include Revised Pay As You Earn (REPAYE), Pay As You Earn (PAYE), Income-Based Repayment (IBR), and Income-Contingent Repayment (ICR). Each plan has specific eligibility requirements and calculations for payment amounts, which may include both spouses' income for married borrowers.

Loan Consolidation

Loan consolidation combines multiple federal student loans with different repayment schedules into a single loan with one monthly payment. This option can simplify the repayment process for borrowers with multiple loan servicers and may also help qualify for better repayment terms. However, it is essential to weigh the pros and cons before consolidating.

Deferment and Forbearance

In cases of financial hardship or other qualifying circumstances, borrowers may be able to temporarily postpone or reduce their monthly payments through deferment or forbearance options. Deferment allows borrowers to temporarily stop making payments, while forbearance involves a temporary reduction or suspension of payments. Interest continues to accrue during these periods, and borrowers are responsible for paying it. It is important to note that deferment and forbearance must be approved by the lender or servicer and are not automatic.

Frequently asked questions