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If you've taken out student loans, graduation can start a ticking clock in terms of when your first payments will come due. So it's important to know how to navigate those loan payments and your own finances so you can make sure you're on the path to get your loans paid off and you don't have any negative effects on your finances and credit.

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When you began college, you likely  had the option of financial aid.

This aid might have been needs-based,  it might have been grants, and it might have been loans. Hopefully, whatever kind of aid you  got involved an intake interview or counseling session so that you could  understand all of the terms and agreements.

But sometimes that doesn't happen… and even if it did, that  was a couple of years ago. But let’s not doubt ourselves. We’re smart!

We’re getting a college degree. Some of us can interpret Hamlet’s soliloquies. And if we can handle Shakespearean prose, we can handle modern finance jargon  like “forbearance” and “consolidation.” Student loans can feel like a lot to deal with, but they don’t need to be incomprehensible.

We just need a little study session. Hi, I’m Erica Brozovsky, and this  is Crash

Course: How to College. a Study Hall series presented in  partnership with Arizona State University. Today we’re going to talk about  how to pay back our student loans. [INTRO MUSIC PLAYS] Okay, time to study some vocab. Everyone’s situation is different,  but by the end of this episode, you’ll have a cheat sheet, or study  guide for paying back your student loans. And like any other technical class  with a lot of specialized language, you might find it useful to take notes.

So this would be a good place to pause and  grab your favorite note taking technology. The first thing to remember  is to always ask questions. Remember that just like in the  classroom, there are no stupid questions.

We took out the loans, so  we should understand them. And one of the first places  we can take our questions will typically be our  college’s financial aid office. They can tell us how much we  owe, and who we owe it to.

In fact, before we graduate, our school  is obligated to offer us exit counseling, which lets us learn about our student  debt and ask any questions we might have. It’s typically an online tutorial  students complete on their own, so it’s important that if you have questions, you talk to an actual person in the  financial aid office before you graduate. Exit counseling can also help  us understand some basics.

Like the amount we borrowed when we first  took out the loan is called the principal. And all loans also have an interest rate, which is like the cost we pay  to whoever loaned us money [-- as great as that would be, they didn’t  do it out of the goodness of their hearts!]. When we pay back our loans, we’ll  have paid off both the principal and the accrued interest.

Now, there are a couple of different  kinds of federal loans that may have been offered to you when you enrolled in college. If you’re a new or recently graduated student, you may have had access to  Direct Subsidized Loans, Direct Unsubsidized Loans (also known as  Stafford Loans), or Direct Plus Loans. A Direct Subsidized Loan is available to any  undergraduate student with financial need.

We talk more about financial aid in Episode 5, but the important thing to know here is that  if you are offered a subsidized federal loan, the government will pay the interest as long  as you are in school at least part-time; for the first six months after you leave  school–which is known as a grace period; as well as during any deferment periods, which  is when your loan payments have been postponed. A Direct Unsubsidized Loan, on the other hand,  is available to any student who wants one. This is not a needs-based loan,  although how much you can borrow is determined by your school, what  year you’re in, and other factors.

You as the borrower are responsible for  paying all of the interest on this loan, and the interest starts accruing immediately. There are also Direct Plus Loans. These are made to either the  parents of undergraduates or graduate or professional students.

Eligibility here is based on a credit check; if you’re an undergraduate who  is dependent on your parents and they can’t receive Plus loans,  you may be eligible for more Direct Unsubsidized Loans. The same is true if you’re an  independent undergraduate student; if you’re not dependent on your parents, you won’t have access to the Direct Plus Loans, but you may be eligible for a higher  amount of a Direct Unsubsidized Loan. For you returning students  who have done college before, you might be thinking “okay, I remember  Stafford Loans - where are the Perkins loans?” I’m sorry to be the bearer of bad news, but the last Perkins loan was distributed  in 2018 and the program no longer exists.

Likewise, Federal Family Education  Loans haven’t been around in a while. Probably the most important  thing to understand about making your federal student loan payments  is that although you’re borrowing money from the government, a third-party loan servicer has  been hired to manage billing, invoicing, payment tracking, and more. To find out who your servicer is, you  can visit the studentaid.gov website.

And it’s important to keep track of what  you owe even while you’re in school, because those loan payments are on the horizon, even if it doesn’t feel like it. That six month grace period after you graduate, where you don’t have to start paying your loans? Well, it goes by fast.

Paying back loans has a significant  effect on your credit score. Each person has one, and it  tells banks and other lenders how likely it is you will pay back a loan on time. You can check yours with a third-party  service or through a bank that you use.

A good credit score can help us get other  loans, buy a house, or rent an apartment. Your score goes up when you reduce  your debt and make timely payments. Of course, sometimes life  happens and this isn’t possible.

In these cases, it’s possible to put loans  on forbearance, or delay making payments. It’s also possible to defer payments  in other circumstances as well. For example, if you go to graduate school, you can defer until you are  finished earning your next degree.

Just be aware that if you do that,  your interest may still accrue. This is one reason why it’s never  too early to start making payments. You can chip away at your loans  when they are on forbearance or even when you are still in school.

It’s sort of like washing a couple  dishes when you have down time. Paying down $100 when you have extra is a  great habit, because over time it adds up. If we don’t make payments on time,  we eventually have to default, meaning we’ve failed to pay back the loan.

This is terrible for our credit and can  cause major problems in other areas of life (like renting an apartment  or financing a vehicle). So deferring loans when possible and  chipping away at them is the best option. Let’s go to the Thought Bubble.

Casey graduated from Crash Course  State College six months ago. She’s been getting reminder  letters from her loan servicer that her loans are about to come out of deferment and she’ll need to start making monthly payments. To make sure she doesn’t fall behind, Casey can make a budget to manage  all of her financial commitments.

She needs to factor in her loan  payments along with medical expenses, rent payments, and necessities  like food and transportation. After looking at the suggested repayment plans, Casey’s still a little confused  about how much she owes and when. If you’re unclear about your  own monthly loan obligations, you can use loan simulator websites to give  you a sense of what you’ll owe and when.

Budgets and tools like this can  help you picture for the future, exactly what you need when  you’re making long-term plans. There are also loan forgiveness programs. There are several ways to qualify,  but some of the most common ways loans can be forgiven include working  for the government or a non-profit for a specific period of time,  teaching at a low-income school, and becoming permanently disabled.

Contact your loan servicer if  you think you might qualify, or look at the detailed information  available at studentaid.gov. Thanks, Thought Bubble. Paying off student loans is a long-term  commitment, and in that time, a lot will happen.

We may change jobs, or even our whole careers. We may find that we have new  obligations that we didn’t expect. Life is full of surprises.

That’s why it’s important to zoom  out from our monthly payments and consider ways to change the larger  process of how we’re paying back our loans. Making payments should feel more  like a marathon than a sprint. So if it seems like we have to cover a  lot of distance in a short amount of time, it may be time to assess our options.

The standard repayment plan calculates  your repayment schedule over 10 years. This could be far too financially  stressful for some borrowers, so other, income-driven repayment  plans may be more appropriate. It’s possible to switch to  a graduated repayment plan, which gives us lower monthly payments  now, but increases over time.

There are also extended repayment  plans, which lower our monthly payments by increasing the length of time  that we’ll be paying back the loan. Here there’s no sudden increase in  steepness, but we’ll be running a lot longer. But figuring out how we want to  repay our loans isn’t the only step we can take to manage how  much we’re paying each month.

There are other ways to lower  monthly loan payments as well. Many of us have multiple federal loans,  and maybe even multiple servicers. We can combine these together,  or consolidate our loans, in order to simplify our  repayment process and have just one monthly payment to think about.

In some ways, it’s a little like deciding between fighting 1 horse-sized duck  or 100 duck-sized horses. But in this case, you usually  choose the horse-sized duck. When we consolidate loans, the  monthly payment tends to be lower, and we usually get more time to pay them back.

Plus, you don’t have to keep  track of 100 different horses. It’s simpler, but there are  some potential downsides. Consolidating loans might  mean forfeiting your right to certain types of loan forgiveness.

Consolidating also means that interest  becomes part of the new principal. So going forward, we’ll be accruing  interest on a higher principal than we would if we hadn’t consolidated. Be careful about for-profit  loan consolidation companies, though–these may result in you  paying larger monthly installments or unfair interest rates.

Last, private loans can’t be  consolidated with federal loans and are not tracked by any federal servicers, so this option doesn’t work for everybody. So as always,   study up before making these decisions  and rely on good advice whenever you can. The important thing to remember  is that there are options.

Ask questions! What we’ve covered in this  episode is just a start, but there are many resources  and people that can help you. So if you ever feel stuck, keep in mind that all of our schooling has  made us excellent learners.

It may seem complicated, but  we’re capable of problem-solving and gaining knowledge about our  loans that can help us conquer them. Becoming a person who is able  to handle those challenges is why we went to school in the first place. Thanks for watching this episode  of Crash Course How to College.

This series is part of an expanded  program called Study Hall. Crash Course has partnered  with Arizona State University to launch Study Hall on its own channel. Check out youtube.com/studyhall where you’ll  find more tips about navigating college, choosing a major, plus foundational  courses connected to college credit courses that students struggle most  with in their first 2 years.

We hope to see you over there!