May grads, your student loan grace period is over. Here's what to do next.

BUFFALO, N.Y. (WKBW) - Student loan debt is the second largest debt in American next to mortgage debt, accounting for $1.2 trillion dollars, Jeff Boron of the Financial Guys in Williamsville confirmed. 

More than 44.5 million people are student loan borrowers, the average college student graduating with a bachelor's degree has an average debt of more than $28,000 according to Nerd Wallet. 

How can you prepare, pay and plan for student loans? Here are some helpful tips below. 

START THINKING ABOUT STUDENT LOANS EARLY:

It's important when thinking about going to college to have student loans on the brain, Boron says. 

"To pick the right college, I mean one that is socially, academically, and also financially right for you," Boron tells his clients. He is a certified college planning specialist at the Financial Guys. He urges parents and students to start planning and thinking about paying student loans sophomore year of high school. 

"People pick the college first, then figure out the major and then come out and say... what can I do with this?" Boron said. "It should be reverse." 

The best piece of advice Boron can give parents and students is to prepare early and often, and to learn about the process of applying and the repayment of student loans. 

For starters... there are two main categories that student loans fall under: federal and private loans. 

Federal Loans: These are the loans given out by the U.S. Department of Education that people have to apply for and aid will be given based on each family/individual's financial situation. Every student is only given a max amount of $27,000 over four years called a Stafford loan. These loans are in the student's name and usually have an interest rate of 3-5% depending if they are Direct unsubsidized or Direct subsidized loans.  

Direct Unsubsidized Loans: While the student is in college, the government pays the interest on the loans, so interest doesn't incur over the four years a student is in college. 

Direct Subsidized Loans: While the student is in college, the student is responsible to pay the interest that incurs over the four years. 

Private Loans: Private loans include the loans that a person takes out with their own bank. Federal aid might not be enough to cover tuition, living expenses, and school materials and that is where students and parents can turn to private loans. 

Connie Cooke, Buffalo State Director of Financial Aid, cautions students when taking out private loans because they do not have the same repayment options as the federal loans do.

She urges students and parents to make sure they read the fine print and to make sure they know the interest rates and repayment guidelines before they commit to a private loan. 

It's never to early to start thinking and planning for student loans, "The biggest thing they [students] can do is prepare, learn and be taught how the whole process works," Boron concludes. 

TIME TO PAY, THE GRACE PERIOD IS OVER: 

The piece of paper or diploma you received in the mail over the summer proves your hard work paid off and you received an education... it's also a reality check that it's time to start paying back your student loans. 

The Board of Education gives recent grads a six month grace period until the payments need to start... and guess what, the summer and fall went by fast (if you graduated in May) and November is the month payments need to start. 

SO, how do you pay back your student loans? Here is a step by step process. 

First and fore most: realize what and how many loans you have. 

The Federal student loan website (FAFSA) does a great job of breaking everything down for you, and even provides an online exit/enterance counseling course to help you understand your loans. 

Second: Set up a payment plan

You do not pay your student loans directly to FAFSA (Free Application for Federal Student Aid). FAFSA sets up a lender/servicer and that is where payments go directly. Think of FAFSA as a resource or guide when it comes to repayment and the servicer as the actual company that takes your money. 

----> How to find your servicer:

1. Sign into your Financial aid account. 

2. Go to My Financial Student Aid page. Under the page is a breakdown of all of the federal direct subsidized, direct unsubsidized and other federal loans you may have. This page will show and direct you to your loan servicer. There are only nine servicers a person can have and you are already assigned to one. 

3. Work with your servicer on repayment plans. 

"A lot of times students are not even aware of their servicer," Cooke said. "They need to stay in communication, know their servicer or servicers." 

Cooke adds that it is very important to keep in contact with the servicer because they are the ones that offer repayment plans and can help if the student cannot pay for their loans. 

"Just do the work, know who your servicers are, know how much you owe, and know how much to plan," Cooke tells her students. 

There is no "best way" to pay back loans, everyone has a different financial situation, students have to be diligent and take responsibility with their repayment, Cooke added.

IT HAS BEEN A FEW YEARS OF PAYMENTS , WHAT ARE MY OPTIONS NOW?  

After paying loans for a few years, it could be time to change your payments. People can have the option to consolidate or refinance their loans. 

Consolidate: means that a person takes all of their Federal loans and put them into one bundle. Instead of paying multiple servicers, the loans are all found in one entity says Cooke. 

Refinancing: is just like refinancing a house, loans are bundled together and then a new loan is created at a lower interest rate. A person has to apply and be accepted by a loan servicer to refinance. 

"They are gong to look for things like your credit history... income...total debt to total income ration to determine your interest rate," Boron said. "If you want a good interest rate you have to come out and have an income to support that debt, that and to have a good credit score." 

It may be worth it to refinance, it doesn't cost anything and an interest rate could be reduced from 8%-5% Boron adds. Once you refinance, you cannot default on your loan. 

Student loan repayment is different for everyone. If you need additional help, it's a good idea to check back with the financial aid department at your school.   

"We also have helped students even up to retirement who are still on repayment of their loans," Cooke concluded. 

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Tips to Addressing The New Appraisal Rule with Reverse Mortgage Borrowers

With a month of experience with the Department of Housing and Urban Development’s new collateral risk assessment for reverse mortgage properties, lenders have reported a relatively smooth process in submitting appraisals to HUD and receiving responses as to whether a second appraisal is needed. And an industry working group has been studying the process, finding that roughly 20% of submissions are requiring a second appraisal. Yet explaining the process and implications to borrowers remains a challenge, originators say, and one that should be addressed upfront.

“Don’t wait until you need another appraisal until you open that door,” said John Luddy, SVP of reverse mortgage lending for Norcom Mortgage, in addressing a National Reverse Mortgage Lenders Association annual conference panel in San Diego in late October.

The impact to borrowers in need of a second appraisal is twofold: the first being a second visit from an appraiser to the home, and the second being the cost of the appraisal, which can be several hundred dollars more than initially anticipated.

“Seniors are concerned about someone else coming into the home,” said Loren Riddick, a reverse mortgage loan officer with New South Mortgage, in addressing that same panel on the appraisal changes.

There are several items that can be addressed with borrowers upfront in order to prevent questions down the road, industry participants explained.

1. Give borrowers a heads up. “Let them know there could be another appraisal,” Luddy says. Originators can also explain the timeline for a second appraisal as well as the time frame for submission to HUD, which most lenders are finding is completed within 24 hours. Some property types, such as those with more than a single housing unit, are more often requiring a second appraisal than single-family units, according to the working group.

2. Explain what happens when the second appraisal is higher than the first. Some lenders and borrowers have questioned whether a second appraisal that comes in higher than the first can be used as the final appraisal. HUD has specified in its FAQs that a higher second appraisal cannot be used.

3. Be proactive by using estimates and managing expectations. “Zillow is a great resource,” said John Dingeman, chief appraiser with appraisal management company Landmark Network. “Put the address into the ‘sell’ box and take a look at the property on Google Maps and Zillow. It’s important to look at whether there are external influences.”

Those influences might be proximity to a gas station or signs of disrepair that could impact the appraised value.

“I believe it’s imperative for the borrower to be part of the process,” Dingeman said, noting that it can be helpful for borrower to accompany the appraiser on the walk through of the home.

“Share the details with the borrowers. They know more about the home [than the appraiser does].”

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