Personal Finance Tip of the Week, By Financial Fundamentals, LLC of Watertown

The student loan repayment plan decision can be confusing. But by proceeding carefully through these 6 steps, you can identify a plan that fits your needs and circumstances - today and in the future.

1. Determine what you owe. Break your list down by loan type, including a breakdown of federal versus private loans.
2. Review cancellation and forgiveness options. Flag any options that could be viable for you today or down the road. Keep in mind that Perkins loans have different forgiveness options than other federal loans.
3. Consider consolidation. Before you decide to proceed, make sure that it won’t jeopardize your forgiveness options.
4. Evaluate payment plans. Before you settle on one, make sure that the plan is allowed by your forgiveness options. Also balance affordability today with cumulative interest payments over the longer term.
5. Enroll. After you submit the required paperwork, follow up to confirm that everything was done correctly.
6. Keep good records. Take a little time to understand that annual documentation requirements for your payment plan, and implement a good record-keeping process at home.

These 6 steps are also summarized in a graphic on our website.

The most important point here is to not start your decision-making process by diving straight into the consolidation or payment plan decision. That’s because an ill-considered consolidation decision can complicate forgiveness or payment plan options, and, similarly, a poorly-considered payment plan decision can complicate forgiveness options too.

Instead, it’s a much better idea to collect all of the facts on forgiveness, consolidation, and payment plans before making your final enrollment decisions.

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Stephen Barkhuff, CFP(R), CFA is the founder and president of Financial Fundamentals, LLC, based in Watertown, MA. Financial Fundamentals helps couples and singles with modest incomes take control of their financial future. Please feel free to email him any questions or comments.