Who is American Student Assistance and what do you do?

A nonprofit, federally-funded organization based in Boston that helps students and families manage higher education debt.

Services include counseling about repayment options, information and support throughout life of loan.

As they prepare to leave school, what should college students know about repaying their student loans?

Before leaving school, students are required to participate in an Exit Interview where they learn how much they owe, projected monthly payments, where to make payments, different payment options, etc.

Graduation can be a hectic time—it may be hard for students to focus on student loan repayment, so hold on to any paperwork for future reference.

When do students have to start repaying their loans?

6-month grace period from the time you drop below half-time to the time you must start paying back your loan.

Do students have different repayment options?

Federal student loans have many flexible repayment options (standard 10-year, graduated repayment, income sensitive, consolidation, extended repayment).

Consolidation is such a buzzword these days. What do students need to know about it?

Consolidation is a repayment option that allows multiple loans to be combined into one. The consolidation loan is used to pay off the balances on the existing loans.

Longer repayment terms, between 12 and 30 years

Lower monthly payment, but longer term, so more interest

Fixed interest rate (weighted average of the underlying loans, then rounding up to the nearest ⅛ of a point)

How can people find out more about consolidation?

They can talk to their existing lender or servicer (the agency they make payment to). They can also visit the borrower section of American Student Assistance’s website.

What if someone can’t make their student loan payment?

If they meet certain criteria, such as if they’re still in school at least half-time, are unemployed, or experiencing some sort of economic hardship, they can postpone payments for a specific amount of time. This is a deferment or forbearance.

Borrowers should call their servicer or visit them online for a complete listing of the available deferment and forbearance options.

The important thing to remember is that there are options—federal education loans allow for much more flexibility than does traditional consumer debt—but borrowers must be proactive in letting their servicer know they’re in trouble.

Why is on-time student loan repayment so important?

First step to building good credit, which is the key to a healthy financial future.

Without good credit, you can’t buy a home or a car, or in some cases even get a job.

How does American Student Assistance fit into the repayment process—what do you offer borrowers?

Student loans can feel like a mammoth burden—fitting a student loan payment into a monthly budget that includes rent, utilities, food, transportation, etc. can be hard.

In fact, many people with education loan debt today say their student loans are delaying them from making other major purchases, such as a house or car, or even influencing what career they pursue after college.

Our mission is to help borrowers successfully manage that debt.

We “lighten the loan,” by giving student loan borrowers the right information at the right time.

We currently work with many colleges across the nation to educate students on loan repayment and financial literacy skills.

What does “the right information at the right time” mean?

For a message to have the most impact, you have to target your communication to your audience’s stage of life.

For example, graduation is a busy time of year—students may not be thinking about their student loans.

If a college’s financial aid office chooses to partner with ASA for its federal loans, we will send their graduates a series of communications and newsletters around personal finance, jobs, budgeting, repayment, etc., for the first 2 years that they’re out of school.

By delivering the message about repayment when borrowers are more open to receiving it, we can better grab their attention.

Often, borrowers get into repayment trouble on their student loans because they simply don’t have the information they need to make wise choices. They don’t understand their options. We want to make sure that no one defaults on their loan just because they didn’t know there was an alternative.

Default is a scary word. What does it mean?

For student loans, default is when you fail to make payments on your loan for nine months.

Once you default, your total balance becomes due in full immediately and the default goes on your credit record.

Also means a loss of eligibility for future federal aid, and possibly even wage garnishment or withholding of your tax refund.

Does ASA offer any services to people after they default?

Even when people default, they still have an opportunity to get back on track. There is a federal program called rehabilitation that allows borrowers to make nine months of on-time payments and return their loan to good standing. This offer borrowers a chance to make a new “bright beginning.”

We’re also working on a pilot program with some colleges to identify students who are most “at risk” for default down the road.

For example, statistics show that students who withdraw before graduation often have the most trouble repaying their loans. Even when students drop out, they must repay their student loans.

By reaching out to these students earlier on, we hope to give them much needed support and encouragement as they examine their options and decide on the right course.

What should high school students and parents be thinking about when it comes to borrowing for college?

Borrowing for college can truly be one of the best investments they can make, but they need to make wise choices.

They should know what they’re getting into—research projected monthly payments, interest rates, and repayment terms before accepting a loan.

Think about the long-term ramifications—the average debt for a graduate of a private college is now $23,000, and at public institutions it’s $15,000. And that’s not including graduate school. Are they prepared to make that commitment?

Always look into grants and scholarships (free money) first.

Remember there are plenty of free resources available to answer your questions. If the student has applied to a college, he/she should talk to the financial aid office. Or, if they’re still in high school, they should talk to guidance counselors or visit their local library. For example, TERI College Access in Massachusetts and Reach4Success in D.C. sponsor information centers in their communities and provide “walk-in” service.