How Your Student Loan Servicer Can Help You

There are many student loan servicers out there. The major ones include Nelnet, Great Lakes Educational Loan Services, Inc. and Navient, plus many others. These companies are not out to destroy your life. They will need to become your friends for you to get a handle on your student debt.

They can help you in these areas:

1. Complete Understanding of Your Payment Plan Options

In order to start paying down your debt, you will need to understand the different payment plans that are available. There are seven different repayment plans available for federal loans. If you have private loans, then you are most likely stuck with the payment plan you agreed to when you signed the loan.

  1. Standard repayment: Balance is paid in full at the end of 10 years of monthly payments of principal and interest.
  2. Graduated repayment: You still pay over 10 years but your payments start out lower; you end up paying more since you are delaying some of the payment.
  3. Extended repayment: You will have a lower payment but will be paying longer, up to 25 years, as long as you have $30,000 or more in student debt.
  4. Income-contingent repayment: Uses a complex formula that takes your income into account; payments can be adjusted every year for 25 years. At the end, your balance is wiped out.
  5. Income-based repayment: Payments are set at 15% of your adjusted gross income (can be lower for newer borrowers), and the balance is wiped out at the end of 25 years (20 years for newer borrowers).
  6. Pay-as-you-earn: This is for newer borrowers, and your loan must qualify, but your payment is based on 10% of your adjusted gross income and is paid off at 20 years, adjusting annually along the way. (For related reading, see: What New Student Loan Repayment Options Mean.)
  7. Revised pay-as-you-earn: Revised to include graduate loans, this plan is the same for undergraduates as the original pay-as-you-earn, but if you have graduate loans you can also use this plan; your payments will last for 25 years.

As you can see, you will need to decide what the best situation is for you. (For related reading, see: 10 Tips for Managing Your Student Loan Debt.)

2. Increased Awareness With Your Student Loans

Your loan servicer will be able to provide you with what payment plan you are on and what may be a better payment plan for your situation and goals, as well as help you understand what your balance is and how long it will take to pay it off with the minimum monthly payments. Remember that when you create lower payments you are increasing the amount of money you will be paying over time. So if you want to pay down your student loans fast, stick with the standard repayment schedule and pay extra toward the principal. (For related reading, see: Student Loans: Paying Off Your Debt Faster.)

3. Ability to Make Sure Your Extra Payments Are Going Toward the Principal

If you have the ability to make extra payments on your student debt, you will get it paid down faster. Even if you are just doing an extra $20 a month you will be making more progress than what is mapped out. I know that nobody wants to have student debt for 20 years and the only way to prevent that is by making any extra payments you can every month. But remember to make sure those extra payments are going toward your principal, which will only happen if you communicate with your loan servicer. They need to understand what your intent is, otherwise they may put it toward your interest.

Your ability to communicate with your student loan servicer and being aware of your repayment plan will play a major role in how fast you get your student debt paid. Remember your ideal life is around the corner, but it takes sacrifice and perseverance to reach your goals.

(For more from this author, see: 5 Budgeting Steps for Young Families to Follow.)