Borrower boot camp: Get your graduates in repayment shape with these five tips

Doug Savage, TG Senior Regional Account Executive

Say you had the chance to send next semester’s graduates through a “basic training” in loan repayment - a regimen that taught them not only the essentials of responsible repayment, but offered tips on safeguarding their finances in a tough economy. What would you include in the course? How would you help borrowers focus on lean living, building financial muscle, and preparing for the endurance test that is, in essence, repayment?

Here is an “exercise plan” designed to suggest to borrowers a successful path to loan repayment. You could include many things in such a plan; this version offers just an example. Consider adapting these suggestions for your own campus needs, using the information as a supplement to exit counseling, or  including it in future communications by mail or email.

• Build your budget muscle - Strong, well-planned budgets do the heavy lifting for short- and long-term fiscal needs. To make sure income is put to “healthy” use, borrowers will need to establish a budget that takes adversity into consideration - a lay-off or prolonged job hunt, for example. There are numerous online calculators and off-the-shelf personal finance software applications that make creating and using a budget simpler. The more borrowers can anticipate and plan for their expenses in a budget - and adhere to budget requirements with the occasional splurge as a reward - the better off they’ll be.
• Watch those spending calories - The temptation after getting a job and jumping several income brackets is to overindulge. Graduates used to a student’s Spartan existence may want to upgrade lifestyles without preparation; that is, without setting a spending plan. Instead of buying heedlessly, which can leave borrowers vulnerable to credit problems, they should devise a simple spending plan of purchases matched to income “calories” that takes into account long-term life goals.  Such a plan can help borrowers cut unnecessary expenses and focus on saving.
• Track loan “weight” via NSLDS - For a “weight scale” view of where borrowers stand with regard to repayment, the National Student Loan Data System (NSLDS) website (http://www.nslds.ed.gov/nslds_SA/) is invaluable. The site won’t be up-to-the-minute with loan amounts and statuses - for that, borrowers will have to contact individual servicers. But the site does offer a central place to track loan calories burned and find contact information for all loan holders. The site can be especially useful for borrowers with split loans.
• Set a long-distance goal with a repayment plan - Half the battle with any lengthy endeavor like repayment is setting a goal that is appropriate given need and circumstance. The standard repayment plan is not always the best for some borrowers, given dramatic changes in income or a period of time without employment. In such cases, borrowers may do well to consider Income-Based Repayment or another plan that takes into account fluctuations in salary.
• Talk to your repayment coaches, a.k.a., servicers and guarantors - Servicers and guarantors can offer guidance and information to borrowers in tough financial straits. They can also connect borrowers to such repayment options as forbearance and deferment, and explain the pros and cons of loan consolidation.

For help

For more suggestions on what to include in your basic training content for borrowers, contact your colleagues in the field, including guarantors. Guarantors work in all phases of the life of the loan and will likely have materials and ideas on what borrowers should keep in mind as they begin repayment.

Doug Savage is a senior regional account executive with TG. You can reach Doug at (800) 252-9743, ext. 6711, or by email at doug.savage@tgslc.org. Additional information about TG can be found online at www.tg.org.