Be a Responsible Borrower: Monitor Your Student Loan Balance

If you want to be a responsible borrower, you need to monitor your student loan balance. Keeping track of your balance and making regular payments is the best way to ensure that you do not allow your debt to grow to be unmanageable. It also allows you to take advantage of shifts in interest rates and available assistance programs. Both while you are in school and after graduation, there are several reasons to have updated balance information.

Balance Monitoring While In School

While most students do not make loan payments before they graduate, keeping track of your balance is necessary. Particularly when you are taking cost-of-living loans, being aware of your total debt level encourages responsible decisions. You are less likely to spend frivolously when you see your total balance increasing. Furthermore, you may prefer to make interest payments while in school. Even though you are not responsible for making payments, interest is accrued while you are in school. Making interest payments will not reduce your principal balance, but it prevents the interest from increasing your balance while you are in school.

Principal Balance Upon Graduation

After graduation, you will begin to make payments towards repaying your student loans. If you want to be a responsible borrower and put yourself in the best position to manage your debt, you should always know your principal balance. Knowing your loan balance not only allows you to make good decisions about interest rate changes, it keeps you psychologically involved in the process.

It is very easy to become passive about your student loans. If you do this, you will potentially pay more over the life of the loans that is necessary. Being involved increases the chances that you will not miss chances to lower your interest rates, that you will make consolidation arrangements when they are available, and that you will avail yourself of other opportunities.

Similar to a home loan, student loans may be refinanced to take advantage of shifts in interest rates. Between the various loan types, knowing your principal balance is the only way you can properly gauge which shifts are opportunities and which are irrelevant. Government-guaranteed loans, for example, tend to carry lower rates and offer fewer refinancing options. Private loans, however, tend to carry higher rates. It is more important that you refinance these loans when appropriate because your saving can be significant.

The Impact of Government Programs

As an increasing number of recent graduates are facing financial hardships, the government has rolled out a variety of programs to help you manage your debt. These range from options that allow you to lower your interest rate on federally insured money to federally mandated debt reduction and forgiveness programs. While you may not qualify for all of these programs because many are decided based on your total debt burden, if you do not keep track of your loan balance, you will not know which programs you can qualify for and participate in. These are just some of the reasons to track your loan balance that fall under the heading of being a reasonable and responsible borrower.

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