The basics of student loan repayment

This article originally appeared in "Mouthing Off," the blog of the American Student Dental Association (ASDA), on May 13, 2013. Reprinted with permission of the ASDA.

Most dental students are faced with a mind-boggling student debt load. Yet, even if you declare bankruptcy and are granted a discharge of other debts, your student loans will likely NOT be discharged. As much as we would like to ignore that six-figure repayment, it is something that will not disappear in most cases. So, what can you do to help ease the pressure along the way?

First, maintain a positive relationship with your lenders. Call them BEFORE you default on your loans to inquire about your options.

Generally, if you cannot keep up with required loan payments at all, you have a couple of options:

• Deferment: Postpones repayment for a certain period without accruing interest.
• Forbearance: Postpones repayment while accruing interest.

Once you have finished school, you may also consider consolidating your loans. A direct consolidation loan allows a borrower to consolidate many federal student loans into one loan for repayment. In general, to do this, you must have at least one federal loan that is in repayment. Loan consolidation has a few benefits:

• Administrative ease: Consolidation means less individual loan bill.
• Potentially lower monthly payments over a longer repayment period.
• Fixed interest rate: Variable interest loans may receive a fixed interest rate.

However, if you choose a longer repayment period, by decreasing monthly payments you are also extending the term of the loan. Therefore, you will end up paying more in interest over the loan term.

Loan repayment options that require extending the term of your loan should be very carefully considered. Look at your financial budget to assess whether you have other expense items that are not absolutely necessary, and cut back on those first. If you have no other option, speak to your lender for additional help.

For more information on loan consolidation and which loans are eligible for consolidation, go to www.loanconsolidation.ed.gov.

Megan Hille is an accountant at the public accounting firm of Pesavento & Pesavento, which specializes in providing tax, financial planning, consulting, and accounting services for the dental profession.