Las Vegas, NV (October 14, 2014) — Edvisors, publisher of free sites of continually updated information, advice and tools to help students and families plan for and pay for college, today issued Thirteen Common Mistakes to Avoid in Repaying Student Loans as well as strategies to help students build good credit and pay off their loans wisely.
“As the second largest type of consumer debt in the country, student debt is of critical concern to families. Mistakes – such as forgetting to make a payment or misunderstanding how interest accrues – can negatively impact and haunt a student’s future credit rating or result in higher payments over the life of a loan,” said Mark Kantrowitz, Senior Vice President and Publisher of Edvisors and author of Filing the FAFSA.
To help families navigate the complexities and nuances of borrowing, and make the best decisions about repaying college loans, the following are some of the most common mistakes in repaying loans that Edvisors has identified:
Losing track of loans. Graduating with an average of 8-12 loans, students might forget about one of their loans, pay late or even default. Payments are due even if the lender does not send a statement or a coupon book. Make sure you pay on time, by keeping track of vital loan information on a student loan checklist.
Not signing up for auto-debit. A single late payment can damage a borrower’s credit score, so auto-debit can be a smart strategy. Auto-debit automatically transfers the loan payments from the borrower’s bank account to the lender, reducing the likelihood of a late payment and sometimes decreasing the loan’s interest rate by 0.25% or 0.50%.
Failing to claim the student loan interest deduction. Borrowers can deduct up to $2,500 in interest on federal and private student loans on their federal income tax return. The student loan interest deduction is taken as an above-the-line exclusion from income, so taxpayers do not need to itemize to claim the deduction.
Choosing too long a repayment plan. Longer repayment terms lead to lower monthly payments, but also to paying more interest over the life of the loan. For example, increasing the loan term may reduce monthly payments but could double the total interest paid over the life of the loan. Shorter repayment terms save interest.
Accelerating repayment of the wrong loan. If borrowers have extra money, they might be tempted to pay off the smallest loan first. However, by accelerating repayment of the loan with the highest interest rate, borrowers will save the most money and benefit from a quicker payoff of all their loans.
Paying a fee to consolidate. Borrowers can consolidate federal education loans for free at StudentLoans.gov. Borrowers can also choose alternate repayment plans that reduce the monthly loan payment without paying a fee. This is simple and can be done without professional or commercial help. Call the Federal Student Aid Information Center, a toll-free hotline sponsored by the U.S. Department of Education, at 1-800-4-FED-AID (1-800-433-3243) for free information and advice about federal education loans and other forms of federal student aid.
Edvisors publishes free sites of continually updated information, advice and tools to help students and families plan for and pay for college. Every year, millions of students and their families turn to the company’s flagship site, Edvisors.com, for timely, accurate information and tools that help them confidently make the best decisions about paying for college. At the Edvisors ScholarshipPoints.com site, students earn points and enter scholarship drawings (the site has awarded more than $650,000 to date). StudentScholarshipSearch.com is a large free online database of scholarships with an easy-to-use scholarship matching tool. Founded in 1998, Edvisors is based in Las Vegas, Nevada. More information can be found at www.edvisors.com.