College costs require most students to take out loans to cover tuition, supplies, housing, and other living expenses. These loans can impact your life for years after you finish school, influencing your spending habits and determining your ability to purchase a home or qualify for additional credit for other big purchases. If you are among those graduating with student loan debt, you must understand your options for repayment to manage your loans and build a secure financial future.
Know What You Owe
Student loan management begins with knowing exactly how much you owe. Get clear on the total cost of your loan, which is more than just the amount you borrowed. You must include interest and possible fees. The length of your repayment will also impact the cost.
Determine Your Grace Period
Most student loans give you a grace period after you graduate before you need to start making payments. The time can vary by loan type and servicer, but is usually six to nine months.
Choose the Best Repayment Plan for Your Situation
Standard repayment for federal student loans is 10 years. However, you can learn about other Federal Student Loan Repayment Plans and their eligibility requirements to find out if you qualify for an alternative plan:
- Graduated repayment also has a term of 10 years, but begins with lower payments that increase over time.
- Extended repayment increases the loan term to 25 years. Payments are lower at the beginning.
- Income-driven payment plans cap your monthly payment amount based on your income and family size, making repayment more affordable. IDR plans may offer loan forgiveness after you make on-time payments for 20 or 25 years.
If you have private student loans, your lender decides the terms and availability of payment plans.
Determine Your Eligibility for Student Loan Forgiveness
The Public Service Loan Forgiveness Program is a great option if you work in public service or at a nonprofit. This program forgives your loans after 10 years of payments. Military members, veterans, doctors, nurses, and teachers may also be eligible for forgiveness. In rare cases, you could get loan forgiveness for permanent disability, school closure before graduation, or possibly by declaring bankruptcy.
Understand Deferment and Forbearance
If you’re having trouble paying, you may be eligible for a temporary suspension of your payments through a deferment or forbearance. While these options can help you avoid falling behind on your payments, remember that any interest that accrues will get added to your total loan balance.
With a deferment, your loans may or may not accrue interest. To qualify for this option, you must meet one or more of the criteria, which typically include economic hardship, half-time enrollment in school, unemployment, military service, or undergoing cancer treatment.
If you don’t qualify for a deferment, you may be able to get a temporary forbearance if you’re having financial difficulties. All loans accrue interest under forbearance, and you will likely need to verify to qualify.
Pay Extra When You Can
Pay off your student loans faster by putting extra money toward the principal whenever possible. Even a few dollars more than the minimum payment can save you money on interest.
Sign Up for Automatic Payments
Simplify student loan repayment by signing up for autopay. You’ll ensure you never miss a payment and get a reduction in your interest rate. Many private lenders also offer autopay discounts.
Learn Your Eligibility for Employer Loan Repayment Assistance
Some employers offer employee benefits through repayment assistance or student loan matches. You can also consider putting any bonuses or payouts from unused paid time off toward your loan balance.
Consider Consolidation
If you have multiple student loans, you might want to explore your options for consolidating them into a single private loan to access a lower interest rate or shorter repayment. However, your payment could increase, and you might become ineligible for income-based repayment plans or loan forgiveness. You may need to wait until you build a credit history to access favorable loan terms.
Tackle High-Interest Loans First
The debt avalanche strategy is often recommended if you have multiple loans. This approach focuses on paying off the loan with the highest interest rate first. You continue to make the minimum payment on each loan but put all the extra money you can into the loan with the highest interest rate. When you pay off the first loan, direct this payment and any extra funds into the loan with the second-highest interest rate. This strategy can help you save money on interest and pay off your debt faster.
Talk to Your Loan Servicer
Reach out to your lender anytime you have questions or if you find yourself struggling to make payments. You often have alternative options to help you reduce or even pause payments during financial difficulty. The most important thing is to communicate with your lender. Never ignore your obligation. Falling behind can have serious consequences like delinquency or default, which damage your credit or send your account to collections. If you have federal loans, you could also face wage garnishment or have your tax returns seized.
Repaying your student loans can often feel overwhelming, but if you educate yourself on your options, you can take control of your finances and feel more confident. Learn about your repayment options, consider your circumstances, and reach out for help if you need assistance managing your loans.
You might also be interested in: What Is Student Loan Forgiveness and Who Qualifies?
