You probably recall Stephen Covey’s 1989 best-selling book, “The Seven Habits of Highly Effective People.” In a slight variation of that theme, consider some new and timely research that explores the five habits of successful student loan borrowers.
That certainly fits as the title of research released in early April by Navient, which services and manages more than $300 billion in student loans. The company’s findings — loaded with common sense — make for worthwhile reading for anyone who has student loans or is contemplating financial aid.
Dealing with a bundle of student loan debt has become a financial fact of life for many recent college graduates. And for many, it’s a heavy burden that can lead to snuffed out dreams, years of worry about where the money will come from to get out of debt and missed or late payments that add to the toll.
Earlier this month, Navient released an analysis of 6.8 million of its student loan customers that broadly sought to identify the money management traits that led to successful repayment of college debt.
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Here’s what it found: Borrowers who don’t postpone their payments and who track their progress, graduate from college, stick with a payback plan and communicate with their loan service provider substantially increase their chances of a successful outcome. And according to Navient’s analysis, the amount borrowed is not a critical factor in the final outcome.
Regardless of whether you’re pulling down a big salary or just scraping by, it’s all about taking an “engaged approach” to repaying debt, said John Kane, Navient’s chief operating officer.
Here’s more on those five steps:
▪ Don’t put off repayment. Keep deferment options to a minimum unless you truly need a break from payments. Borrowers who use less than six months of forbearance “are nearly twice as likely to successfully repay student loans than those who postpone longer,” Navient’s research showed.
▪ Stay connected. Regularly logging in to your online student loan account keeps you up to date on your progress and makes it easy to explore or renew loan payment plans. Also, keeping your contact information current ensures you and your loan servicer can reach each other — for instance, if there’s a change in your financial situation or a change in address.
▪ Graduate. Navient calls this the “most important step toward realizing the value of your education.” So if you’re still in school, stay on track to graduate. Think of your diploma as a valuable asset and don’t throw it away.
▪ Stay the course. Continuing to throw every spare nickel and dime each month — even if it’s a small amount of your take-home pay — knocks down the balance.
▪ Keep the communication lines open. Talk to your loan servicer, especially in times where you’re between jobs or feeling like you’re running into financial difficulties. Navient said 90 percent of the time “when we talk to a struggling federal loan customer, we can help him or her get on an affordable payment plan and avoid default.”
There are clear benefits to following this blueprint, not the least of which is paying off your loans in full. Being debt-free can be very liberating.
Here’s a final tip for the class of 2015: If you’re about to graduate with federal student loans on the books, sign up with your lender for an automatic debit on your bank account. You’ll get a 0.25 percentage point reduction on your interest rate.