As college costs continue to rise, many college graduates have student loan debt. While the amount may be overwhelming considering the pay for an entry-level job, students have more repayment options than other borrowers. There are ten proven ways to make student loan repayment a breeze.
What You Need To Know
Exit counseling helps students understand the student loan repayment process. There are 10 strategies to make repayment more manageable when you're entering the workforce and potentially facing a large amount of debt. First, organize everything, including loan servicers, monthly payments, and repayment options. If you have several loans, you may want to consider consolidating them. Organization will help you manage all the paperwork, ensure you make payment deadlines, and can budget appropriately as you begin to build your credit. There are even loan forgiveness programs through nonprofit and government jobs that may help reduce some of the debt. There are many options for former students, and you do not have to pay a third-party company to help repay loans.
While nobody wants to start their career in debt, it’s a growing reality for college graduates. How you manage the debt is important because it establishes your credit history and future borrowing opportunities. If you make missteps early, you’ll pay the price for years.
There are several ways to manage college debt. That’s probably the most important thing you need to know. Don’t let the debt burden you. There are a variety of repayment options, unlike most private loans.
1. Organize all your loans
College graduates likely have more than one loan, and maybe even more than one type.
Loan types include subsidized, unsubsidized, and private loans, to name a few. If you have private student loans, they work like traditional loans, offering you few repayment options. However, most federal loans offer repayment plans.
First, find your loan agreements, so you know the type of loan you took out. Create a spreadsheet to organize all the loan details if you have multiple loans.
Know your loan servicer, which is the company handling the billing and other services on your federal student loan. If you don't know who it is, log into your Student Aid portal through the U.S. Department of Education. You can also call the Federal Student Aid Information Center (FSAIC) at 1-800-433-3243.
If you have private loans, pull your credit through Annual Credit Report. It’s the only free credit report. You’ll see three credit bureaus. Pull your credit with each one, so you don’t miss a loan.
Once you know about all your loans, take note of:
- interest rates
- terms
- grace periods
- loan amounts
Federal Stafford Loans (Subsidized and Unsubsidized) have a six-month grace period, while private student loans may have different grace periods.
While six months seems like a long time, don’t wait. Organize your paperwork early. Six months can pass in a breeze when you move and start a new job.
Organization is important but perhaps the most overlooked part of life. Take the time to do it. Organization is the best way to find financial success.
2. Contact the loan servicer
Don’t wait for the loan servicer to contact you. Once you have your loans organized, contact the loan servicer.
If you don’t know who services your loan, check with the U.S. Department of Education.
Most college graduates move once or twice after leaving their college campus, so it’s important to know who their servicer is so you can update your address.
You don’t want important loan repayment information getting lost or delayed due to address changes.
3. Calculate your loan payments
Now, to the most important question – how much will you pay each month? Use the U.S. Department of Education’s student loan repayment calculator. This calculator has three paths that you can take depending on your goals. Is it to find the best loan repayment strategy, get help paying the loan, or exploring what it will cost if you borrow more money?
Call your loan servicer to make arrangements if the monthly payment is too high, based on your expected income.
4. Decide on a loan repayment plan
Now that you know how much you’ll pay each month and whether that works for your budget, you can decide on a loan repayment plan. Most loans are paid back over ten years. That doesn’t mean a ten-year repayment plan is your only option. If you extend the repayment time frame, you’ll pay more interest.
You can extend the timeframe and the amount of your monthly payment. Look into an income-driven repayment plan. That's when the lender calculates the amount you pay based on your income and family size rather than your loan amount.
You can also change your due date or how long you repay your loan. Of course, the longer it takes to pay it back, the more interest you'll pay.
You can also consider a forbearance or deferment. You have repayment options, to help manage the college debt.
5. Consider student loan consolidation
If you have multiple loan payments, it may be worth checking into consolidation. That way you have only one payment to track.
You lose some benefits of student loans when you consolidate, so be smart about managing your student loans. Do your research.
When you graduate, many companies offer consolidation plans. Don’t pay a fee. There’s no cost to consolidate student loans.
6. Create one due date
If you do not consolidate your loan payments, and you have multiple, call your loan servicers and change your due date. Choose a date that works for you, based on your budget. Make all the payments due on the same date, so you never forget when your loans are due.
For some people, it’s better to have loan payments spread out during the month especially if your budget is tight. That’s fine. Just make sure you complete the next step, so you never miss a payment.
7. Setup automatic payments
Setup automatic payments once you’ve figured out your repayment plan and your monthly payments. Since you’re just starting your credit history, you want to make payments on time. With automatic payments, you’ll never forget a due date.
8. Don’t pay for help even if you run into financial trouble
The student loan industry is a big business. Third party companies will tell you they’ll solve your financial worries. Ignore the promises.
The U.S. Department of Education recommends contacting your loan servicer directly for help paying your loans or making changes to the payment plan. Your loan servicer will help you for free. Do not pay a third-party company for help.
There are all sorts of options if your financial situation changes. You can defer payments if you call your loan servicer.
Don’t rely on a third party’s promises to get you through a tough time. Take matters into your own hands. Never pay a fee for help. Your servicer is there to help you for free.
Ask your parents if they use a financial advisor who can help you navigate difficult financial times.
Once you’re back on your feet, consider hiring a certified financial advisor to help you achieve your long-term and short-term financial goals.
9. Consider a job that forgives your loan
Some employers, mostly government and nonprofits, forgive portions of your student loan. If you have significant loans, consider an employer participating in the Public Service Loan Forgiveness Program (PSLF).
Qualifying employers include most government organizations, tax-exempt not-for-profit groups, and other types of nonprofits that provide qualifying public service.
You may qualify if you work for an eligible employer and after you've made 120 qualifying monthly payments under a repayment plan.
Search for your employer to see if they participate in the loan forgiveness program.
10. Make extra payments
Once you’re on your feet and saving money from your job, make extra loan payments. It makes a huge difference even if you pay just a few hundred dollars a year. Specify how you want the money used. Do you want it to prepay future monthly installments or do you want it to pay off the principal?
If you have other loans or debt, pay the highest interest first.
You won’t pay a pre-payment penalty on an education loan, including federal and private student loans.
While some graduates want to pay off their debt quickly, don’t rush until you have enough saved up for an emergency expense. When you’re young, it’s hard to find a reason for an emergency fund. You need one, though, that covers three to six months of living expenses.
A certified financial advisor can help you determine when it’s time to make extra payments. He’ll look at your whole financial picture, both in the short and long term.
Exit Counseling
When you leave college or drop below half-time enrollment, you will be required to complete exit counseling for your student loans. It can be done online and takes about 30 minutes to finish.
Saving for retirement
Retirement?! What?! Yes, we said the R word. While you’re just starting in the workforce, it’s never too early to think about retirement. If you have a federal job, consider the Thrift Savings Plan or a 401(k)K in the private sector.
the You want to make sure you’re paying down your debt while also saving for the future. A certified financial planner knows the rules of the financial road and will help you navigate them so you’re making the best financial decisions for your life.
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