By Michelle Singletary
Washington Post Staff Writer
Wednesday, November 10, 2010; 8:36 PM
Tick tock. Tick tock.
That's the sound recent college graduates are hearing as they near the day of reckoning. The typical six-month grace period on student loans is about to end.
Then wham! They face the reality of what it costs to get an education.
For years, I've written, talked and generally fussed about the way people handle their money. Yet it never - and I mean never - ceases to amaze me how people borrow money with so little understanding about how much they owe and how long it will take to pay it back. And the worst are borrowers who take out loans for college.
So what should you do if your grace period is coming to an end this month? Here are some suggestions from the Project on Student Debt, an initiative of the Institute for College Access & Success, a nonprofit independent research and policy organization. You can find all 10 of its tips at http://bit.ly/avNe7V:
l Know what you owe. "Don't bury your head in the sand," says Lauren Asher, the institute's president. "Dealing with the debt head-on gives you the most options. If you've got federal student loans, you really do have choices in how to deal with it. But if you ignore it, you have fewer choices."
To find out your loan terms, go to the source - your lender or lenders. You can also find details of your student loans, including balances, by going to the National Student Loan Data System, which is the U.S. Department of Education's central database for student aid. The Web site is www.nslds.ed.gov.
l Know when you owe. A grace period is how long you have after leaving school before you have to make your first payment. It kicks in after you graduate, leave school or drop below half-time enrollment. But the length of that grace period can vary. For federal Stafford loans, it is six months. It's nine months for federal Perkins loans. If you don't know your grace period, you could end up in default on your loan. This is not a great position to put yourself in because it could affect your ability to apply for other types of repayment options.
I worked with a graduate who was in default and she didn't know it. She hadn't opened the many letters she had received from her lender.
"Because I didn't have any money so I didn't see the point of opening the letters," she said. She hadn't realized that her lender hadn't put her loans in deferment - as she had requested - because she was back in school full time working on a master's degree. One telephone call cleared it up.
l Let your lender know where you are. I get complaints from borrowers who are in default because they say their loan statements were mailed to an old or incorrect address. But it often turns out that the borrower failed to forward new contact information to the lender. Or maybe he or she did inform the lender, but a month or two or three goes by and nothing comes in the mail. Come on. You know you owe this money - every month. If you don't hear from the lender, then call, e-mail, text or tweet. But not doing anything because you haven't heard anything isn't a good excuse.
l Find the right repayment option: One of the best is the relatively new Income-Based Repayment program, or IBR. This option, which is not available for private student loans, is intended to set a reasonable monthly payment based on a borrower's income and family size. Under IBR, after 25 years of qualifying payments, your remaining debt, including interest, will be forgiven. New federal loans taken out by new borrowers in 2014 and later are forgiven after 20 years, Asher said. For public service workers - teachers, nurses and those in military service - the debt is forgiven after 10 years. To get more details, go to www.IBRinfo.org.
About this time of year, I begin to get e-mails from panicky borrowers. Their cries of desperation go something like: "My income isn't enough to cover rent, transportation and my other bills, plus my student loans. What should I do?"
It's the last question that I have the most trouble with. It's as if they think I know a magic student loan fairy who can wave her wand and erase the debt or reduce it.
My answer is sadly the same: There is no magic solution. You've got to pay the debt. Somehow. The tips from the Project on Student Debt will help.
Readers can write to Michelle Singletary c/o The Washington Post, 1150 15th St. NW, Washington, D.C. 20071. Her e-mail address is email@example.com. Comments and questions are welcome, but due to the volume of mail, personal responses may not be possible.