Cosigning Archives - Nelnet Bank

3 Student Loan Mistakes to Avoid in Repayment

nelnetAdmin — Fri, 18 Jun 2021 14:47:35 +0000

If you graduated from college this year, you may realize just how much student loan debt you have. With the average student loan debt at around $29,000 per student, it can be overwhelming to see that number and you may wonder how you are going to pay it back. Well, take a deep breath: you have several options when it comes to repayment. Don’t hesitate to give your student loan servicer a call because they will help you work through your options. Or, you can also follow these 4 steps to get ready for student loan repayment. It’s important to investigate your options and be prepared. It’s equally important to know a few things you should avoid.

Deferment & Forbearance

Deferment and forbearance allow you to temporarily postpone making payments or can reduce your payment for a period of time. Sounds great, right? So, what’s the problem? Your student loans continue to accrue interest. That interest could cost you thousands of dollars a year, depending on your student loan debt. Don’t delay the inevitable. You will have to pay back your student loans whether you pay them now or pay them later. Deferment and forbearance are great options if you have no financial means when you enter repayment. However, you shouldn’t use them as a way to delay paying your student loans. If you do need to go this route, try to at least make interest payments on your loans. If you don’t, the interest will capitalize leading to higher student loan debt and higher monthly payments once your deferment or forbearance expires.

Don’t Miss Payments

Make your payments every month and on time. If a loan payment is not made by the due date, the loan becomes delinquent until payment is received. Depending on your servicer or lender, this delinquency can affect your credit report as a negative mark, therefore negatively affecting your credit score. In addition, when you miss monthly payments, your payment will double, then triple, and continue to snowball which may put you in a situation that’s difficult to catch up on.

Avoid Scams

We’ve all heard the saying, “if it sounds too good to be true, it probably is.” It may seem enticing to pay a company to handle the stress of your student loans and promise you low payments or loan forgiveness, which are why these companies exist, but you’ll be wasting your money. Student loan servicers and lenders will not charge fees for finding a repayment plan that fits your needs. The U.S. Department of Education offers several student loan repayment plans and loan forgiveness, cancellation, or discharge for certain circumstances, but all of their services are free of charge.

Being prepared for repayment and understanding what you should avoid are two big steps to successfully paying off your student loans. Just remember, your student loan servicer is there to help you. If you need to adjust your repayment plan or just have questions about your student loans, give them a call (800.446.4190).

Nelnet Bank does not provide legal, investment, tax, or financial advice. This page and the information contained herein is for informational purposes only. This content is not meant to address the circumstances of any particular individual. Nothing contained in this article constitutes a recommendation or endorsement by Nelnet Bank. For specific advice about your unique circumstances, consult with a qualified professional.

From time to time, articles may provide hyperlinks to web pages operated by third parties. When you click on these hyperlinks, you will be leaving Nelnet Bank’s website. Nelnet Bank has no control over such sites or their content, and is not responsible or liable for any such site or content. Nelnet Bank does not endorse or recommend the contents of the third-party sites. Your use of a third party website is subject to their terms of use and privacy policy.

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A Guide to Important Student Loan Terms

nelnetAdmin — Mon, 03 May 2021 19:09:01 +0000

Student loans can have a language all their own. Understanding these 20 essential loan-related terms can help you navigate the world of student loans.

Federal student loans – Many of these student loans (e.g., Direct Loans) are owned by the U.S. Department of Education. Certain other federal loan types (commercially-held Federal Family Education loans) are owned by guarantee agencies and private companies; however, such loans are no longer being made. Federal student loans generally don’t require you to have a credit history, with some exceptions, or a cosigner. If you are allowed a grace period, you won’t have to repay these student loans until you graduate or change your enrollment status to less than half-time. Federal student loans first disbursed on or after July 1, 2006 have a fixed interest rate. Federal loans generally offer more repayment options than private student loans, with some of the benefits including deferment, forbearance, forgiveness, and Income-Driven Repayment (IDR) plans. They also may be included in temporary relief, such as the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
Private student loans – Student loans that are offered by a variety of banks, credit unions, and state-based or state-affiliated organizations are referred to as private student loans. You can learn about these loan programs through your bank or credit union, your university or college’s financial aid office, a friend or relative’s recommendation, or online research. The terms and conditions of these student loans are set by the lender. Interest rates may be fixed or variable, and may be higher than interest rates on federal student loans, depending on your credit history and financial circumstances. These loans often require you to have an established credit history or a cosigner. Some private lenders, like Nelnet Bank, allow eligible cosigners to be released after a certain number of consecutive, on-time monthly payments. There are many differences in fees, penalties, policies, and options for repayment of your loans, so you’ll want to do your research to make sure you get options and protections for your situation.
Loan application – A document that provides the essential information about the borrower, or cosigner, on which the lender bases the decision to lend.
Promissory note (or Credit Agreement) – A promissory note (also called a credit agreement) is a document that you will sign agreeing to the terms and conditions, and promising to repay the loan.
Cosigner – A person who agrees to be responsible for repaying your student loan if you don’t make your monthly payments.
Disbursement – A distribution of funds from the lender for your loan.
Loan term – The length of time available for you to repay your loan.
Principal – The initial balance of your loan (the amount you borrowed and have to pay back). This term can also refer to the amount still owed on a loan.
Interest – What a lender charges for lending you the money. It is a calculation based on an interest rate and outstanding principal balance.
Fixed interest rate – Interest rate set at the beginning of the loan term and will not change over time.
Variable interest rate – The interest rate will change, on a recurring basis, throughout the loan term. With this type of program, it’s important to be aware that your monthly payments may fluctuate over time, which may increase the cost of borrowing.
Capitalization – The process of adding unpaid accrued interest to the principal balance of your loan. This may occur when your loan enters repayment after grace or the end of a deferment or forbearance. When loan interest capitalizes, it makes your principal balance larger.
Grace period – A period of time after you leave school when you aren’t required to make full monthly loan payments. While most lenders offer some sort of grace period, you will need to check the length of time and payments required.
Repayment – This is the period when you are required to repay the loan. Some student loans enter repayment immediately after disbursement, while others may not begin repayment until after a grace period.
Interest-only payments – Some student loan lenders offer periods of time that allow you to make interest-only payments. While the principal balance stays the same, you can prevent the interest from capitalizing and increasing your student loan balance.
Deferment – Allows you to temporarily postpone or reduce your monthly payment amount for a specified period. During this time on private student loans, interest may continue to accrue and may be capitalized at the end of the deferment.
Forbearance – Allows you to temporarily postpone or reduce your monthly payment amount for a specified period of time. During this time on private student loans, interest will continue to accrue and may be capitalized at the end of the forbearance.
Income-Driven Repayment (IDR) Plans – IDR plans are available for federal student loans and are designed to make repayment more manageable. These plans reduce monthly payment amounts based on your income, family size, and student loan debt. These plans may also result in a loan forgiveness option. If you have private student loans, check with your lender or servicer for alternative payment options.
Forgiveness – An opportunity to have some or all of your student loan debt forgiven, in particular, if you work for a nonprofit, certain low-income school districts, or some government sectors and make a certain number of on-time payments. This is generally only available with federal student loans. Loan forgiveness may be considered taxable income.
Student loan refinancing – The process of obtaining a new student loan to pay off an old student loan(s) with new terms. You may want to refinance one or more of your student loans into a new refinance loan when interest rates are lower, which may save you money and make it more convenient to pay off multiple loans. Refinancing your federal student loans into a private loan may cause you to lose certain benefits.

Phew! There are more terms, but that might be enough for today.

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Nelnet Bank Directs Borrowers in Need to Resources about COVID-19 and Student Loans

nelnetAdmin — Mon, 03 May 2021 18:44:08 +0000

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was designed to help ease stress caused by COVID-19 on everyone, including college students and those in the process of repaying their federally owned student loans. That doesn’t mean there’s no stress in navigating what it all means or where to go for help if you need it.

The U.S. Department of Education Office of Federal Student Aid provides answers to your questions about federal student loans on studentaid.gov and is your best resource. We answer a couple of questions here that we hope may help you.

Why am I not eligible for a 0% interest rate?

Your loans with Nelnet Bank are private student loans, so they are not eligible for the COVID-19 relief. The CARES Act provides temporary student loan relief for student loans held by the U.S. Department of Education. Private student loans aren’t subject to the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

What If I’ve Been Furloughed, or I’ve Lost My Job?

First, if you have federally held student loans, there are temporary student loan relief programs – automatic administrative forbearance and 0% interest – applied to those loans. Your federal loan payments are basically paused during this time, offering you relief on those loans while you get your bearings. For these federal loans, interest won’t accrue, and you won’t be required to make payments, until the payment pause is lifted. (Studentaid.gov provides all your answers to questions about this.)

The next step you take should be to contact your loan servicer for your federal student loans, and let them know you’ve lost your job. You’ll want to learn about different payment plans that may make it possible for you to stay current on your loans if you still are unemployed when the temporary forbearance is lifted. Contacting your loan servicer with questions or for help discussing your options is a good idea.

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