September 12, 2017

How to Get Started on Repaying Student Loans

If you’re getting ready to graduate from college, still within your student loan grace period, or simply planning for the future with regards to student loan repayment, knowing how to get started is an important step in the process.

If you’re getting ready to graduate from college, still within your student loan grace period, or simply planning for the future with regards to student loan repayment, knowing how to get started is an important step in the process.

Last year, the U.S. Department of Education announced that over 11 percent of federal student loans entering repayment between 2012 and 2013 went into default during the subsequent three-year period. Yet, with more and more repayment options available to former college students becoming available, there’s never been a better time for creating a workable plan for making on-time payments and avoiding default on your student loans.

Below you’ll find some important information that can help you take a proactive approach to student loan repayment.

Get to Know Your Loans

The first step in repaying your student loans is knowing where you currently stand on your loan balances, repayment status and who provided you with the original loan(s). By doing so, you’ll have a better grasp on what your repayment and forgiveness options are, as well as when your first student loan payments are due.

Depending on your loan and lender, you may need to begin repaying your loans immediately after they’re disbursed, or you could have student loans that offer a grace period, which often requires you to begin repaying loans soon after leaving school. In either case, knowing what your loan repayment future looks like will give you a much clearer picture of how it will affect your finances until the loan is paid off.

Understand Your Repayment Options

Once you’ve identified the types of student loans you have, your next step is exploring the repayment options you have available as part of your loan. In most cases, you’ll have a minimum payment that will be due each month until the balances on your student loans are paid off. Whether you have a private student loan or a federal student loan, you may have anywhere from 10 to 30 years to fully repay your loans.

One thing to know about repaying your loans, however, is that much of your monthly payments may go towards interest rather than principal. Essentially, this means you will be paying on the interest that has accrued since your loan’s origination, with only a certain amount going towards paying down the actual balance. This is why so many individuals with outstanding student loans choose to take advantage of loan prepayments that can be applied towards paying down a loan’s principal instead of the interest.

Student Loan Consolidation

Another thing to consider with regards to repayment is student loan consolidation. If you have multiple student loans and you’re having difficulty making all of the individual payments, you could benefit from one of several loan consolidation options that are designed to streamline the repayment process. Ultimately, what your consolidation opportunities look like will depend on what types of loans you currently have.

Income-Driven Repayment

If you opted to get your student loans from the U.S. Department of Education, you were likely presented with several plans for repayment. Unless you chose a specific federal loan, you probably received your loan under the Standard Repayment Plan, which is the default loan option for federal student loan borrowers.

One of the great things about federal student loans is their ability to be converted into other repayment plans in most cases. This means that even if you have a Standard Repayment Plan loan, you could decide to change your loan into an income-driven repayment plan to make your monthly payments more affordable. By having your loan payments based on the amount you make in your profession, you could give yourself more discretionary income each month, and lower your interest and/or payments on your loans.

Income-driven repayment options include:

Beyond these options, there are a number of other repayment programs available that may be a better fit. The most important thing is to get the right type of loan for you and your situation.

If you need help finding a suitable repayment option, take a minute to fill out our online form, and one of our loan specialists will help you find a plan that works best for you.

Keep Your Payments Current

No matter what you choose in terms of student loan repayment, you’ll want to avoid missing your monthly payments, even if you are struggling with repaying your loans.

If you begin having difficulty making your payments, you may want to look into methods of postponing your student loan payments for a certain period of time. While this may not be available for all private loans, many federal loan repayment plans offer deferments and forbearance options that take into consideration an individual’s employment status, health issues, or unexpected financial challenges.

As mentioned earlier, something you’ll want to avoid is allowing your student loans to go into default. When loans go into default, lenders usually require you to pay the full balance, your credit score is affected, your wages could be garnished, and you could feel the financial impact for years to come. With so many options available for repayment, defaulting on your loans is usually avoidable.

No matter what your situation, it’s always better to plan ahead for your student loan repayment. Speak to one of our student loan specialists at (800) 771-6358 or fill out our free online form to figure out how to make your monthly payments more affordable and to stay on track with your personal repayment plan.