PHEAA Tells Recent Grads to Prepare to Repay their Student Loans
College has come and gone for Pennsylvania spring graduates — and now it’s time to pay up.
The six-month “grace period” is almost over, and the bills are going to start arriving.
Keith New, Pennsylvania Higher Education Assistance Agency communications director, said the average Pennsylvania borrower graduates with $25,000 debt, and the six months are meant to help them get financially comfortable before beginning to repay it.
“It’s set up to help the recent graduate get on their feet financially,” New said. “You know, get a job, get an apartment, figure out their budget so they’re able to stabilize their financial situation before making their student loan repayment.”
The commonwealth’s unemployment rate is at 5.8 percent, but many college graduates still struggle to find jobs, even past the six months.
“If a borrower does have problems, if they’re entering a payment for the first time or they’ve been repaying for years, any type of a hardship, they should respond quickly by reaching out to the student loan servicer," New said. "They’re there to help. They’re there to provide assistance.”.
He said this is not an issue graduates can ignore, because they can default on their loans.
“Once that happens, there are long-term serious, negative consequences for them – difficulty buying a house, difficulty getting favorable interest rates for future loans, or maybe not even getting a loan at all for the future,” New said. “So your credit score could be ‘dinged’ and you could find up in a situation where you have your wages garnished.”
But New said there are also options such as deferment, temporarily delaying the repayment of your principal, and forbearance, stopping or reducing monthly payments for up to a year, but interest will continue to accrue.
“All these options are available to make repayment manageable regardless of your financial situation,” New said. “So you can start out with a smaller loan payment when you have your first job, and you’re presumably making less money than you’re going to make later, and then you can owe more later.”
PHEAA suggests graduates set a reasonable budget and stick to it, avoid credit card debt and high interest rates and enroll in an automatic debit program, which helps most borrowers save an additional .25 percent interest rate.